##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 
 (Mark One)
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-51116
 HURRAY! HOLDING CO., LTD.
 (Exact name of Registrant as specified in its charter)
 
 N/A
(Translation of Registrants name into English)
 Cayman Islands
(Jurisdiction of incorporation or organization)
 11/F, China Railway Construction Tower
No. 20 Shijingshan Road
Shijingshan District
Beijing 100131, Peoples Republic of China
(Address of principal executive offices)
 
 Securities registered or to be registered pursuant to Section 12(b) of the Act.
 Title of each class
    
    Name of each exchange and on which registeredAmerican Depositary Shares,
each representing 100
ordinary shares, par value
US$0.00005 per share
    
    Nasdaq Global Market
 Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
(Title of Class)
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
NONE
(Title of Class)
  Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes þ No o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
  U.S. GAAP þ
    
    International Financial Reporting Standards as issued o
by the International Accounting Standards Board
    
    Other o
 o o
 o þ




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##### 



TABLE OF CONTENTS
 INTRODUCTIONPART IItem 1. Identity of Directors, Senior Management and Advisers
    
    
    4Item 2. Offer Statistics and Expected Timetable
    
    
    4Item 3. Key Information
    
    
    4Item 4. Information on the Company
    
    
    36Item 4A. Unresolved Staff Comments
    
    
    59Item 5. Operating and Financial Review and Prospects
    
    
    59Item 6. Directors, Senior Management and Employees
    
    
    80Item 7. Major Shareholders and Related Party Transactions
    
    
    87Item 8. Financial Information
    
    
    89Item 9. The Offer and Listing
    
    
    89Item 10. Additional Information
    
    
    90Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    97Item 12. Description of Securities Other than Equity Securities
    
    
    97PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    98Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    98Item 15. Controls and Procedures
    
    
    99Item 16. Reserved
    
    
    99Item 16A. Audit Committee Financial Expert
    
    
    100Item 16B. Code of Ethics
    
    
    100Item 16C. Principal Accountant Fees and Services
    
    
    100Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    101Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    101Item 16F. Changes in Registrants Certifying Accountant
    
    
    101Item 16G. Corporate Governance
    
    
    101PART IIIItem 17. Financial Statements
    
    
    102Item 18. Financial Statements
    
    
    102Item 19. Exhibits
    
    
    102Exhibit 1.2Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 15.2Exhibit 15.3Exhibit 15.4
   2




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INTRODUCTION
  
    
    ADSs refers to our American depositary shares, each of which represents 100 ordinary
 shares;
 
    
    $, US$ and U.S. dollars refer to the legal currency of the United States;
 
    
    China and the PRC refer to the Peoples Republic of China, excluding, for the
purposes of this annual report on Form 20-F only, Taiwan and the special administrative
regions of Hong Kong and Macau;
 
    
    Hurray! Holding Co., Ltd. refers to HURRAY! HOLDING CO., LTD.
 
    
    ordinary shares refers to our ordinary shares, par value US$0.00005 per share;
 
    
    RMB and Renminbi refer to the legal currency of China;
 
    
    telecom operators refer to China Mobile, China Unicom and China Telecom, the three
principal telecommunication network operators in China; and
 
    
    we, us, our company and our refer to Hurray! Holding Co., Ltd. and its
subsidiaries, affiliates and predecessor entities.
  FORWARD-LOOKING INFORMATION
  
    
    our goals and strategies;
 
    
    our future business development, financial condition and results of operations;
 
    
    our projected revenues, earnings, profits and other estimated financial information;
 
    
    expected changes in our margins and certain costs or expenditures;
 
    
    expected continued acceptance of our new revenue model;
 
    
    our plans to expand and diversify the sources of our revenues;
 
    
    expected changes in the respective shares of our revenues from particular sources;
 
    
    our plans for staffing, research and development and regional focus;
 
    
    our plans to launch new products and services;
 
    
    our plans for strategic partnerships with other businesses;
 
    
    our acquisition and divestiture strategy, and our ability to successfully integrate past
or future acquisitions with our existing operations and complete planned divestitures;
 
    
    competition in the PRC wireless value-added, music and online video industries;
 
    
    the outcome of ongoing, or any future, litigation or arbitration;
  3




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
    
    the outcome of our annual PFIC and Investment Company Act evaluations;
 
    
    the expected growth in the number of Internet and broadband users in China, growth of
personal computer penetration and developments in the ways most people in China access the
Internet;
 
    
    changes in PRC governmental preferential tax treatment and financial incentives we
currently qualify for and expect to qualify for; and
 
    
    PRC governmental policies relating to media and the Internet and Internet content
providers and to the provision of advertising over the Internet.
  
 PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 A. Selected Financial Data
   4




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For the Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006(1)
    
    
    2005(1),(3)(in thousands of U.S. dollars, except percentages)Historical Condensed Consolidated Statement of Operations DataNet revenues:Wireless value-added services
    
    
    20,169
    
    
    
    42,672
    
    
    
    50,038
    
    
    
    62,512
    
    
    
    56,063Recorded music
    
    
    14,473
    
    
    
    11,287
    
    
    
    10,489
    
    
    
    6,203
    
    
    
    Total net revenues
    
    
    34,642
    
    
    
    53,959
    
    
    
    60,527
    
    
    
    68,715
    
    
    
    56,063Cost of revenues:Wireless value-added services
    
    
    (15,332
    )
    
    
    (32,840
    )
    
    
    (36,394
    )
    
    
    (40,672
    )
    
    
    (28,635
    )Recorded music
    
    
    (12,625
    )
    
    
    (6,730
    )
    
    
    (6,233
    )
    
    
    (3,553
    )
    
    
    Total cost of revenues
    
    
    (27,957
    )
    
    
    (39,570
    )
    
    
    (42,627
    )
    
    
    (44,225
    )
    
    
    (28,635
    )Gross profit
    
    
    6,685
    
    
    
    14,389
    
    
    
    17,900
    
    
    
    24,490
    
    
    
    27,428Operating expenses
    
    
    (33,382
    )
    
    
    (22,669
    )
    
    
    (61,462
    )
    
    
    (19,882
    )
    
    
    (14,277
    )Operating income (loss) from continuing operations
    
    
    (26,697
    )
    
    
    (8,280
    )
    
    
    (43,562
    )
    
    
    4,608
    
    
    
    13,151Interest income
    
    
    454
    
    
    
    1,613
    
    
    
    2,313
    
    
    
    2,529
    
    
    
    1,390Interest expense
    
    
    (14
    )
    
    
    
    
    
    
    (179
    )
    
    
    (45
    )
    
    
    (27
    )Gain on reduction of acquisition payable
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    Foreign exchange loss
    
    
    
    
    
    
    (8,990
    )
    
    
    
    
    
    
    
    
    
    
    Other income, net
    
    
    342
    
    
    
    247
    
    
    
    466
    
    
    
    315
    
    
    
    330Income (loss) before income tax credit (expense), equity in (loss) earning of affiliated company, impairment for investment in affiliated company and discontinued operations
    
    
    (25,915
    )
    
    
    (10,410
    )
    
    
    (40,962
    )
    
    
    7,407
    
    
    
    14,844Income tax credit (expenses)
    
    
    (234
    )
    
    
    (486
    )
    
    
    182
    
    
    
    (205
    )
    
    
    (323
    )Equity in (loss) earning of affiliated company
    
    
    (914
    )
    
    
    64
    
    
    
    (63
    )
    
    
    
    
    
    
    Impairment for Investment in affiliated company
    
    
    
    
    
    
    (1,871
    )
    
    
    
    
    
    
    
    
    
    
    Net (loss) income from continuing operations
    
    
    (27,063
    )
    
    
    (12,703
    )
    
    
    (40,843
    )
    
    
    7,202
    
    
    
    14,521Discontinued operations:Net (loss) income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (612
    )
    
    
    (836
    )
    
    
    4,098Gain from disposal of discontinued operations
    
    
    222
    
    
    
    413
    
    
    
    193
    
    
    
    
    
    
    
    Net income (loss) from discontinued operations, net of tax
    
    
    222
    
    
    
    413
    
    
    
    (419
    )
    
    
    (836
    )
    
    
    4,098Net income (loss)
    
    
    (26,841
    )
    
    
    (12,290
    )
    
    
    (41,262
    )
    
    
    6,366
    
    
    
    18,619Less: Net income (loss) attributable to the non-controlling interests and redeemable non-controlling interest(2)
    
    
    4,183
    
    
    
    337
    
    
    
    (688
    )
    
    
    (562
    )
    
    
    Net (loss) income attributable to Hurray! Holding Co., Ltd.
    
    
    (22,658
    )
    
    
    (11,953
    )
    
    
    (41,950
    )
    
    
    5,804
    
    
    
    18,619Loss attributable to Hurray! Holding Co., Ltd. ordinary shareholders per share, basic and diluted
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.02
    )
    
    
    
    
    
    
    0.01Shares used in calculating basic (loss) income per share
    
    
    2,196,291,947
    
    
    
    2,185,615,129
    
    
    
    2,172,208,190
    
    
    
    2,189,748,563
    
    
    
    2,092,089,848Shares used in calculating diluted (loss) income per share
    
    
    2,196,291,947
    
    
    
    2,185,615,129
    
    
    
    2,172,208,190
    
    
    
    2,208,758,636
    
    
    
    2,129,228,961
 (1)
    
    The statements of operation data for the years ended December 31, 2005 and 2006 have been
adjusted to show the financial results of our software and system integration business (which
was described in Item 4.A. Information on the CompanyHistory and Development of the
Company) as discontinued operations. That business segment was terminated in the third
quarter of 2007.(2)
    
    Reflects implementation of ASC 810 (formerly referred to as SFAS No.160, Non-controlling
Interests in Consolidated Financial Statements-an amendment of ARB No.51.)  5




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(3)
    
    The amounts of share-based compensation included in operating expenses for 2006, 2007, 2008
and 2009 reflect the adoption of ASC 718 Stock Compensation (formerly referred to as
Statement of Financial Accounting Standard 123(R) (SFAS 123(R)) effective January 1, 2006. As of and for the Years Ended December 31, 20092009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(in thousands of U.S. dollars, except percentages)Historical Condensed Consolidated
Balance Sheet DataCash and cash equivalents
    
    
    48,489
    
    
    
    59,473
    
    
    
    65,979
    
    
    
    74,597
    
    
    
    75,959Short term investments
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts receivable, net
    
    
    3,192
    
    
    
    12,658
    
    
    
    14,691
    
    
    
    13,449
    
    
    
    18,089Other current assets
    
    
    2,094
    
    
    
    5,580
    
    
    
    8,777
    
    
    
    3,342
    
    
    
    2,297Property and equipment, net
    
    
    880
    
    
    
    980
    
    
    
    1,636
    
    
    
    1,954
    
    
    
    2,536Goodwill
    
    
    2,099
    
    
    
    3,157
    
    
    
    5,621
    
    
    
    39,621
    
    
    
    23,869Other assets
    
    
    1,414
    
    
    
    6,476
    
    
    
    8,890
    
    
    
    7,027
    
    
    
    4,953Total assets
    
    
    68,168
    
    
    
    88,324
    
    
    
    105,594
    
    
    
    139,990
    
    
    
    127,703Current liabilities
    
    
    11,327
    
    
    
    6,316
    
    
    
    14,467
    
    
    
    12,960
    
    
    
    7,636Non-current liabilities
    
    
    280
    
    
    
    316
    
    
    
    877
    
    
    
    851
    
    
    
    843Total liabilities
    
    
    11,607
    
    
    
    6,632
    
    
    
    15,344
    
    
    
    13,811
    
    
    
    8,479Redeemable non-controlling interests
    
    
    371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ordinary shares (2,200,194,040,
2,193,343,740, 2,174,784,440,
2,163,031,740 and 2,229,754,340
shares issued and outstanding as of
December 31, 2009, 2008, 2007, 2006
and 2005, respectively)
    
    
    110
    
    
    
    110
    
    
    
    109
    
    
    
    108
    
    
    
    111Other Hurray! Holding Co., Ltd.
shareholders equity
    
    
    54,286
    
    
    
    76,799
    
    
    
    85,474
    
    
    
    122,712
    
    
    
    118,508Non-controlling interests
    
    
    1,794
    
    
    
    4,783
    
    
    
    4,667
    
    
    
    3,359
    
    
    
    605Total liabilities, redeemable
non-controlling interests and
shareholders equity
    
    
    68,168
    
    
    
    88,324
    
    
    
    105,594
    
    
    
    139,990
    
    
    
    127,703Other Historical Condensed
Consolidated Financial DataGross profit marginWireless value-added services
    
    
    24.0
    %
    
    
    23.0
    %
    
    
    27.3
    %
    
    
    34.9
    %
    
    
    48.9
    %Recorded music
    
    
    12.8
    %
    
    
    40.4
    %
    
    
    40.6
    %
    
    
    42.7
    %
    
    
    Total gross profit margin
    
    
    19.3
    %
    
    
    26.7
    %
    
    
    29.6
    %
    
    
    35.6
    %
    
    
    48.9
    %Operating income (loss) from
continuing operations
margin(1)
    
    
    (77.1
    %)
    
    
    (15.3
    %)
    
    
    (72.0
    %)
    
    
    6.7
    %
    
    
    23.5
    %Net (loss) income from continuing
operations margin(1)
    
    
    (78.1
    %)
    
    
    (23.5
    %)
    
    
    (67.5
    %)
    
    
    10.5
    %
    
    
    25.9
    %Net (loss) income attributable to
Hurray! Holding Co., Ltd.
margin(1)
    
    
    (65.4
    %)
    
    
    (22.2
    %)
    
    
    (69.3
    %)
    
    
    8.4
    %
    
    
    33.2
    %Depreciation
    
    
    837
    
    
    
    990
    
    
    
    1,269
    
    
    
    1,580
    
    
    
    1,461Amortization
    
    
    862
    
    
    
    2,338
    
    
    
    2,375
    
    
    
    1,901
    
    
    
    478Capital expenditure
    
    
    678
    
    
    
    349
    
    
    
    864
    
    
    
    957
    
    
    
    1,289
 (1)
    
    Operating income (loss) from continuing operations margin, net (loss) income from continuing
operations margin and net (loss) income attributable to Hurray! Holding Co., Ltd. margin are the
operating income (loss) from continuing operations, net (loss) income from continuing operations
and net (loss) income attributable to Hurray! Holding Co., Ltd. as a percentage of our total
revenues.  6




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Exchange Rate Information
   Noon Buying RateRMB per US$1.00High
    
    
    LowNovember 2009
    
    
    6.8300
    
    
    
    6.8255December 2009
    
    
    6.8299
    
    
    
    6.8244January 2010
    
    
    6.8295
    
    
    
    6.8258February 2010
    
    
    6.8330
    
    
    
    6.8258March 2010
    
    
    6.8270
    
    
    
    6.8254April 2010 (through April 23)
    
    
    6.8275
    
    
    
    6.8229
  Average Noon Buying RateRMB per US$1.002005
    
    
    8.18262006
    
    
    7.95792007
    
    
    7.58062008
    
    
    6.91932009
    
    
    6.83072010 (through April 23)
    
    
    6.8270
 B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
  7




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RISKS RELATED TO OUR COMPANY
 Risks Related to Our Wireless Value-added Services
 We depend on China Mobile, China Unicom and China Telecom, the three principal telecommunications
network operators in China, for the major portion of our revenue, and any loss or deterioration of
our relationship with China Mobile, China Unicom and China Telecom, due to the 2008 government
imposed restructurings or otherwise, may result in severe disruptions to our business operations
and the loss of a major portion of our revenue.
      8




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We incurred net losses in 2007, 2008 and 2009 and may incur additional losses in future periods.
  The termination or alteration of our various agreements with the telecom operators and their
provincial affiliates would materially and adversely impact our revenue and profitability.
   Unilateral changes in the policies of the MIIT and the telecom operators and in their enforcement
of their policies have resulted in service suspensions and our having to pay additional charges to
the telecom operators, and further changes could materially and adversely impact our revenue and
profitability in the future.
    9




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The Chinese government and the telecom operators may prevent us from distributing, and we may be
subject to liability for, content that any of them believe is inappropriate.
    The telecom operators may impose higher service or network fees on us for their own business
purposes or if we are unable to satisfy customer usage and other performance criteria, which could
reduce our gross margins.
    10




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If any of the telecom operators changes its practices with regard to how service selections appear
on its WAP portal, the revenue from our services, and thus our overall financial condition, could
be materially and adversely affected.
  Our revenue from WVAS may be adversely affected by the telecom operators providing their own WVAS
that compete with our services.
  The popularity of our WVAS, and therefore revenues from these services and our profitability, would
be adversely affected if our competitors offer more attractive and engaging services or we are
unsuccessful in developing and offering attractive and engaging services on 3G mobile networks.
  The telecom operators allow us to offer our services over their networks only if we achieve minimum
customer usage, revenues and other criteria, and our revenues from WVAS depend in particular on our
ability to meet those criteria to keep our services among the most popular offered through the
telecom operators.
   11




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We must rely on the telecom operators to maintain accurate records of fees paid by users of our
services, deduct service and network fees due to them and pay us fees due to us. Errors in
record-keeping by the telecom operators could adversely affect our profitability and the market
price of our ADSs.
    Our dependence on the billing records of the telecom operators may adversely affect our ability to
record, process, summarize and report revenue and other information regarding our WVAS. Any
inaccuracies in our records and public reports could adversely affect our ability to effectively
manage our business and the market price of our ADSs.
  We recognize revenue for a portion of our 2G services on an accrual basis, based on an internal
estimation process which involves the use of estimates of monthly revenues to the extent we are
unable to obtain actual figures from the telecom operators before we finalize our financial
statements, which could in turn require us to make adjustments to our financial statements.
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Our revenues and cost of revenues for WVAS are affected by billing and transmission failures and
other discrepancies which are often beyond our control.
  
    
    the delivery of our service to a customer is prevented because his or her phone is
turned off for an extended period of time, the customers prepaid phone card has run out
of value or the customer has ceased to be a customer of the applicable mobile operator;
 
    
    any telecom operator experiences technical problems with its network, thus preventing
the delivery of our services to the customer;
 
    
    we experience technical problems with our technology platform that prevents delivery
of our services; or
 
    
    the customer refuses to pay for our services due to quality or other problems.
   The telecom operators do not supply us with detailed information on billing and transmission
failures, revenues, service and network fees or other charges, and accordingly it is difficult to
analyze the factors affecting our financial performance.
    13




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The services we offer and the prices we charge are subject to approval by the telecom operators,
and if requested approvals are not granted in a timely manner or approved services are suspended or
terminated, our competitive position, revenue and profitability could be adversely affected.
  Risks Related to Our Music Business
 The businesses of our affiliated music companies are subject to constantly changing consumer
tastes.
    
    
    technical expertise of their production and recording staff;
 
    
    popularity of the artists represented by our affiliated music companies;
 
    
    access to songs or songwriters; and
 
    
    effectiveness of online and offline marketing and promotional activities.
  Our affiliated music companies may unknowingly purchase or license songs, which have already been,
or may in the future be, sold or licensed to third parties, which could create costly legal
disputes over intellectual property rights with such third parties and the songs authors or
composers.
   14




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Our affiliated music companies often enter into contracts with third parties on behalf of their
artists. If those artists fail to satisfy the requirements under those contracts, our affiliated
music companies may be subject to claims, which could expose them to significant costs and business
disruption.
  Revenue from our affiliated music companies may not grow as fast as expected due to continuing
problems of copyright enforcement in China and retention of popular artists.
  Risks Related to Our Online Video Business
 Our expansion into the online video market may not be successful. Chinas online video market is
highly competitive, and we may be unable to compete successfully against established industry
competitors and new entrants, some of which have greater financial resources than we do or
currently enjoy a superior market position than we do.
   Our online video business has been and may continue to be subject to claims based on the videos
shared on Ku6.com.
   15




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Maintaining copyright protection controls may prove to be costly and our online video business
revenue from online marketing services may not be able to offset its cost in acquiring legally
licensed content.
   Our online video business depends on online advertising for a significant portion of its revenues,
but the online advertisement market includes many uncertainties, which could cause its advertising
revenues to decline.
  
    
    the online advertising market is new and rapidly evolving, particularly in China.
As a result, many of our online video business current and potential advertising
clients have limited experience using the Internet for advertising purposes and
historically have not devoted a significant portion of their advertising budget to
Internet-based advertising;
 
    
    changes in government policy could restrict or curtail our online video business
online advertising services. For example, in 2006 and 2007, the PRC government enacted
a series of regulations, administrative instructions and policies to restrict online
medical advertising. As a result of these regulations, our online video business may
lose some of its existing medical advertising clients;
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
    
    advertising clients that have invested substantial resources in other methods of
conducting business may be reluctant to adopt a new strategy that may limit or compete
with their existing efforts; and
 
    
    the acceptance of the Internet as a medium for advertising depends on the
development of a measurement standard. No standards have been widely accepted for the
measurement of the effectiveness of online advertising. Industry-wide standards may
not develop sufficiently to support the Internet as an effective advertising medium.
If these standards do not develop, advertisers may choose not to advertise on the
Internet in general or through Ku6.com.
  
    
    the development of a large base of users possessing demographic characteristics
attractive to advertising clients;
 
    
    the acceptance of online advertisement as an effective way for business marketing
by advertising clients;
 
    
    the effectiveness of its advertising delivery, tracking and reporting systems; and
 
    
    the resistance pressure on online advertising prices and limitations on inventory.
 If our online video business fails to establish and maintain relationships with content, technology
or infrastructure providers, it may not be able to continually provide attractive content for
viewers and maximize advertising revenue, the primary source of revenue for most free content
online video sites.
   If our online video business fails to continue to innovate and provide products and services to
attract and retain users, it may not be able to generate sufficient user traffic levels to remain
competitive.
  Our online video business depends on a strong brand and it will not be able to attract users,
customers and clients for its products and offerings if it does not maintain and develop its
brands.
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Additional Risks Related to Our Company
 Our recent acquisitions and strategic investments and any future acquisitions or investments may
have an adverse effect on our ability to manage our business and may subject us to unforeseen
liabilities. We may reorganize our business, including disposition of certain assets.
    We may need to record impairment charges to earnings if our acquisition goodwill, investments in
affiliate companies or acquired intangible assets are determined to be impaired, which would
adversely affect our results of operations.
  We face intense competition, which could cause us to lose market share and materially adversely
affect our business and results of operations.
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We operate in rapidly evolving industries, which may make it difficult for investors to evaluate
our business.
  
    
    attract and retain users for our WVAS;
 
    
    expand the services that we offer;
 
    
    respond effectively to rapidly evolving competitive and market dynamics and address
the effects of mergers and acquisitions among our competitors;
 
    
    effectively manage our new music businesses and leverage our music library;
 
    
    achieve synergies and capture opportunities in the Internet and media markets;
 
    
    enhance the efficiency of our online video business operations and leverage our
online video business resources;
 
    
    maintain, expand and enhance our relationships with telecom operators; and
 
    
    increase awareness of our brands and user loyalty.
  We depend on key personnel for the success of our business. Our business may be severely disrupted
if we lose the services of our key executives and employees or fail to add new senior and middle
managers to our management.
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Rapid growth and a rapidly changing operating environment strain our limited resources. Our future
growth could be adversely affected if we cannot manage our expansion effectively.
  
    
    develop and quickly introduce new WVAS, adapt our existing services and maintain and
improve the quality of all of our services, particularly as the market for 2.5G and 3G
services evolves and matures;
 
    
    effectively maintain our relationships with China Mobile and China Unicom, enhance
our relationships with China Telecom and establish new relationships with any other
recipients of mobile licenses in China so that we are able to offer WVAS over their
networks;
 
    
    attract and retain popular artists for our music and artist agency businesses;
 
    
    attract viewers by webcasting licensed video content;
 
    
    offer a user-friendly platform for online video sharing;
 
    
    derive more revenue from our online video business;
 
    
    continue training, motivating and retaining our existing employees, including our
senior management, and attract and integrate new employees;
 
    
    develop and improve our operational, financial, accounting and other internal systems
and controls; and
 
    
    maintain adequate controls and procedures to ensure that our periodic public
disclosure under applicable laws, including U.S. securities laws, is complete and
accurate.
 Any failures of the mobile telecommunications network, the Internet or our technology platform or
those of third-party service providers we rely upon may reduce use of our services and our
revenues.
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Our corporate structure could be deemed to be in violation of current or future Chinese laws and
regulations, which could adversely affect our ability to operate our business effectively or at
all.
   
    
    levying fines,
 
    
    confiscating the incomes of any of our company, Beijing Hurray! Times or our VIEs,
 
    
    revoking the business licenses of any of our company, Beijing Hurray! Times or our
VIEs,
 
    
    shutting down servers or blocking websites maintained by any of our company, Beijing
Hurray! Times or our VIEs,
 
    
    restricting or prohibiting our use of our financial assets to finance our business
and operations in China,
 
    
    requiring any of us, Beijing Hurray! Times or our VIEs to restructure our ownership
structure or operations, and/or
 
    
    requiring any of us, Beijing Hurray! Times or our VIEs to discontinue any portion of
or all of their WVAS.
  We depend upon agreements with our VIEs for the success of our business. These agreements may not
be as effective in providing operational control as direct ownership of these businesses and may be
difficult to enforce.
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We generate our internal funds almost exclusively from Beijing Hurray! Times. If that company is
restricted from paying dividends to us, we may lose almost all of our internal source of funds.
   If we fail to keep up with rapid changes in technologies and user behavior, our future success may
be adversely affected.
  Our revenues may fluctuate significantly and may adversely affect the market price of our ADSs.
  
    
    attract and retain users in the increasingly competitive WVAS market in China;
 
    
    maintain and grow our 2G and 2.5G market share and revenues, and successfully offer
3G services;
 
    
    successfully implement our business strategies, including integrating our recent
strategic acquisitions with our existing core business; and
 
    
    update and develop our services, technologies and content, which is highly complex.
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We may not be able to adequately protect our intellectual property rights and we may incur
significant expenses in protecting our intellectual property rights.
    We may be subject to intellectual property rights claims or other claims based on the content and
services we provide, which are costly to defend, could require us to pay damages, and could limit
our ability to use certain technologies and content in the future.
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We have limited business insurance coverage, which could expose us to significant costs and
business disruption.
  While we believe that we currently have adequate internal control procedures in place, we are still
exposed to potential risks from legislation requiring companies to evaluate controls under Section
404 of the Sarbanes-Oxley Act of 2002. If we fail to maintain an effective system of internal
control over financial reporting, we may not be able to accurately report our financial results or
prevent fraud.
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There are significant uncertainties under the New EIT Law relating to our PRC enterprise income tax
liabilities.
   We believe that we were a passive foreign investment company (PFIC) for taxable years 2006, 2007,
2008 and 2009 and we may be a PFIC for the current taxable year, which could result in adverse U.S.
federal income tax consequences to U.S. investors.
   Anti-takeover provisions in our charter documents could make an acquisition of us, which may be
beneficial to our shareholders, more difficult and may prevent attempts by our shareholders to
replace or remove our current management.
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Shareholder rights under Cayman Islands law may differ materially from shareholder rights in the
United States, which could adversely affect the ability of us and our shareholders to protect our
and their interests.
  We believe that all participants of our existing equity compensation plans who are PRC citizens are
currently required to register with the State Administration of Foreign Exchange of the PRC, or
SAFE, and the failure to so comply could subject us and such participants to penalties. We may also
face regulatory uncertainties that could restrict our ability to adopt additional equity
compensation plans for our directors and employees and other parties under PRC law.
 Operating Procedures for
Administration of Domestic Individuals Participating in the Employee Stock Option Plan or Stock
Option Plan of an Overseas Listed Company Notice
on Printing and Distributing the Operating Rules for the Notice of the State Administration of
Foreign Exchange on the Relevant Issues about Foreign Exchange Control over the Financing and
Return Investment of Domestic Residents through Overseas Special Purpose Companies
 Changes in PRC tax laws could have a material adverse effect on our operating results.
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Regulation and censorship of information disseminated over the Internet in China may adversely
affect our business and subject us to liability for information displayed on or linked to our
websites.
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The new PRC Property Rights Law may affect the perfection of the pledge in our equity pledge
agreements with our consolidated affiliated entities and their individual shareholders.
   Our contractual arrangements with our consolidated affiliated entities in China may result in
adverse tax consequences to us.
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LEGAL RISKS RELATED TO WIRELESS AND INTERNET SERVICES
 The telecommunication laws and regulations in China are evolving and subject to interpretation and
will likely change in the future. If we are found to be in violation of current or future Chinese
laws or regulations, we could be subject to severe penalties.
    
    
    levy fines;
 
    
    confiscate our income or the income of our affiliates;
 
    
    revoke our business license or the business license of our affiliates;
 
    
    shut down our servers or the servers of our affiliates and/or blocking any Web or WAP
sites that we operate; and
 
    
    require us to discontinue any portion or all of our WVAS services business.
 The regulation of Internet website operators is also new and subject to interpretation in China,
and our business could be adversely affected if we are deemed to have violated applicable laws and
regulations.
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We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of
Internet business and companies.
  
    
    We only have contractual control over our websites. We do not own the websites due
to the restriction of foreign investment in businesses providing value-added
telecommunication services in China, including online information services.
 
    
    There are uncertainties relating to the regulation of the Internet business in
China, including evolving licensing practices. This means that permits, licenses or
operations at some of our companies may be subject to challenge, or we may not be able
to obtain or renew certain permits or licenses, including without limitation an
Internet news license, which is issued by the State Council News Office, an Internet
culture business permit, which is issued by the Ministry of Culture, an audio/video
program transmission license, which is issued by the State Administration of Radio,
Film and Television, an Internet publication business license, which is issued by the
General Administration of Press and Publication, an online game virtual currency
issuance or trading license, which is issued by the Ministry of Culture, and a
surveying and mapping qualification certificate for Internet map services, which is
issued by the State Bureau of Surveying and Mapping. This may significantly disrupt
our business, or subject us to sanctions, requirements to increase capital or other
conditions or enforcement, or compromise enforceability of related contractual
arrangements, or have other harmful effects on us.
    Intensified government regulation of Internet cafes could restrict our ability to maintain or
increase user traffic to our websites.
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RISKS RELATED TO DOING BUSINESS IN CHINA
  The Chinese legal system embodies uncertainties which could limit the legal protections available
to you and could also adversely affect our ability to operate our business.
  Any occurrence of pandemic avian influenza or other widespread public health problem, or any
recurrence of severe acute respiratory syndrome, or SARS, could adversely affect our business and
results of operations.
   
    
    quarantines or closures of some of our offices which would severely disrupt our
operations,
 
    
    the sickness or death of our key officers and employees, and
 
    
    a general slowdown in the Chinese economy.
  We may incur substantial increases in labor cost due to the promulgation of the new labor contract
law.
  A severe and prolonged global economic recession and
the corresponding slowdown in the Chinese economy may adversely affect our business, results of operations and financial condition.
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Changes in Chinas political and economic policies could harm our business.
  
    
    economic structure;
 
    
    level of government involvement in the economy;
 
    
    level of development;
 
    
    level of capital reinvestment;
 
    
    control of foreign exchange;
 
    
    methods of allocating resources; and
 
    
    balance of payments position.
  Governmental control of currency conversion may affect the value of our ordinary shares and ADSs.
  Inflation in China and measures to contain inflation could negatively affect our profitability and
growth.
  Our shareholders may face difficulties in effecting service of process, enforcing foreign judgments
or bringing original actions in China based on United States or other foreign laws against us or
our management.
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We may be subject to fines and legal sanctions if we or our Chinese employees fail to comply with
recent PRC regulations relating to employee stock options granted by overseas listed companies to
PRC citizens.
  RISKS RELATING TO OUR ADSs
 One shareholder has significant influence over the outcome of our shareholder votes.
  We face foreign exchange and conversion risks, and fluctuation in the value of the Renminbi may
have a material adverse effect on the value of our ordinary shares and ADSs.
   The price of our ADSs has been volatile historically and may continue to be volatile, which may
make it difficult for holders to resell the ADSs when desired or at attractive prices.
   
    
    announcements of technological or competitive developments;
 
    
    regulatory developments in our target markets affecting us, our customers or our competitors;
 
    
    announcements regarding intellectual property rights litigation;
 
    
    actual or anticipated fluctuations in our quarterly operating results;
 
    
    changes in financial estimates by securities research analysts;
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
    
    changes in the economic performance or market valuations of our products;
 
    
    addition or departure of our executive officers and key research personnel; and
 
    
    sales or perceived sales of additional ordinary shares or ADSs.
   As a foreign private issuer with ADSs listed on the NASDAQ Global Market, we follow certain home
country corporate governance practices instead of certain NASDAQ requirements.
   
    
    our board of directors be comprised of a majority of independent directors;
 
    
    our directors be selected or nominated by a majority of the independent directors or
a nomination committee comprised solely of independent directors;
 
    
    our board adopt a formal written charter or board resolution addressing the director
nominations process and such related matters as may be required under the U.S. federal
securities laws;
 
    
    the compensation of our executive officers be determined or recommended by a
majority of the independent directors or a compensation committee comprised solely of
independent directors; and
 
    
    issuances of securities in connection with equity-based compensation of officers,
directors, employees or consultants be approved by shareholders.
 As we are a Cayman Islands company, our shareholders may face difficulties in protecting their
interests, and our ability to protect our rights through the U.S. federal courts may be limited.
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Our shareholders may have difficulties in enforcing judgments obtained against us.
  Anti-takeover provisions in our organizational documents may discourage our acquisition by a third
party, which could limit your opportunity to sell your shares at a premium.
   The voting rights of holders of ADSs are limited by the terms of the deposit agreement.
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We may be required to withhold PRC income tax on the dividends we pay you (if any), and any gain
you realize on the transfer of our ordinary shares and/or ADSs may also be subject to PRC tax.
  You may be subject to limitations on transfer of your ADSs.
  Your right as a holder of ADSs to participate in any future rights offerings may be limited, which
may cause dilution to your holdings.
  
 Item 4. Information on the Company
 A. History and Development of the Company
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B. Business Overview
 Introduction
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Products and Services for Users
 Our WVAS Services
  SMS Services
 IVR Services
 RBT Services
 WAP Services.
 MMS Services
 Java Games.     
 Our Music and Artist Agency Business
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Our Online Video Business
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
    
    Media Information Channel Services (Short Video Services): Leveraging off its
abundant video content, large user base and strong relationships with content
providers, our online video business plans to further expand its coverage of video
news reports and to establish itself as a mainstream media outlet in China.
 
    
    Film/Television Program Services (Long Video Services): Our online video business
plans to build an independent brand center for film and television programs, providing
users with high-quality programs purchased by our online video business or developed
in cooperation with third parties.
 
    
    Wireless Video Services: With the growing accessibility of 3G technology, our
online video business plans to take advantage of its leading position in the online
video market and the rich resources of Hurray!s wireless business to develop a
wireless video business.
 
    
    Online Music Services: Our online video business recently established a music
division which will have access to our music business digital and mobile music
production and distribution expertise and capabilities.
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Arrangements with Customers
 Network Service Agreements with Telecom Operators
 General.
 Fee Arrangements and Other Payment Considerations.
   Obligations with Respect to Our Services.
 Term and Termination and Other Material Provisions.
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Music Copyright Agreements with the Telecom Operators and Service Providers
 General.
 Fee Arrangements.
 Term and Termination and Other Material Provisions.
  Recording and Artist Agency Agreements with Artists
 General.
 Fee Arrangements.
 Term and Termination and Other Material Provisions.
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Performance Agreements with Third Parties
 General.
 Fee Arrangements.
 Other Material Provisions.
 Content License Agreement
 General.
 Fee Arrangements
 Other Material Provisions.
 Online Advertisement Agreements
 General.
 Fee Arrangements.
 Other Material Provisions
 Product and Content Development
 Wireless Value-Added Services
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Music Production, Concert Promotion and Artist Agency Services
      Online Advertisement
  Sales and Marketing
 Wireless Value-Added Services
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Online Sales and Marketing
  
    
    Handset Manufacturers Partnerships. We partner with major handset manufacturers to
embed our services and service links into mobile handsets, which enables mobile users to
directly access our services without having to go through the service portals operated by
the telecom operators. We work with major global and domestic handset manufacturers such
as Motorola, Sony Ericsson, TCL and Konka.
 
    
    Bundling of Products. We bundle certain of our products, primarily 2.5G products,
together for a single fixed fee that is lower than what would be payable if the user had
ordered those products separately. We often use bundled products together with a free
trial period to attract new users by giving them a free or low-cost 2.5G experience. We
also use bundled products to attract users that are price sensitive. In addition, bundling
can be an effective way to maintain user interest in our services because they can choose
from a number of services without incurring additional incremental cost and also to expose
users to the wide range of quality services that we offer. Because the content coverage
and product quality of individual products are better than those of the bundled products,
we have not experienced migration of high-use customers from individual services to the
bundled products.
 
    
    Cross-selling. We cross-sell among our various 2G and 2.5G services. Specific
cross-selling activities include placing a tool bar on the first page of all our games.
This enables users to easily try our other games without needing to return to the main
China Unicom WAP portal, as well as promoting our website to potential users as a fun,
easy-to-access place to learn about and request our wireless content and applications. We
also focus on cross-selling to users of our 2G services to migrate them to our
subscription-based, premium 2.5G services.
 Offline Sales and Marketing
  
    
    Direct Advertising. We engage in direct advertising in print, radio and TV media to
market and promote our WVAS and music-related products. We believe that direct advertising
is one of the most effective ways to market and promote our services to mobile users.
 
    
    Promotional Events.We maintain important marketing relationships with China Mobile,
China Unicom and China Telecom, including hosting promotional events throughout China
featuring our pop singers or latest releases with the telecom operators. At these events,
we create brand awareness by interacting with consumers to educate them about our mobile
music services. In addition, our promotion of our innovative services, such as our mobile
novels which feature various popular PRC titles in electronic format that are delivered
to the mobile phones of subscribers in installments, which service we believe was the
first of its kind in China, has resulted in significant media attention.
 
    
    Sales Co-promotion.We develop integrated sales campaigns with traditional media
companies and multinational corporations.
 
    
    Retail Promotion.We enter into partnerships with retailers of mobile handsets in
certain provinces, whereby the retailers sales personnel recommend our services to
customers and, in certain instances, offer free trials to these customers. In certain
cases, we share the revenues generated through such promotions with the retailer.
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Our Music and Artist Agency Business
  
    
    Online and mobile distribution.Our affiliated music companies have built dedicated
teams to focus on licensing music rights to Internet and mobile services providers. Such
licensing agreements typically involve an upfront minimum license fee, plus royalties paid
to the record companies by the services provider based on usage. With the recent
significant growth in the distribution of music via the Internet and WVAS and the
increased attention by the Chinese government and business community to intellectual
property protection, we believe that this new sales channel represents the largest growth
potential for our affiliated music companies.
 
    
    Concert tours.We organize concert tours for our artists through our well-known
concert promotion company, Fly Songs, and our other affiliated music companies. This is
not only an effective way to raise the profile of our artists nationwide, but also to
generate revenues from concert ticket sales and corporate sponsorship.
 
    
    Corporate sponsorship.Frequently, the artists of our affiliated music companies
appear in commercial advertising or serve as corporate image ambassadors on behalf of
consumer products and services companies. Our affiliated music companies proactively seek
out such opportunities to promote our artists and generate revenues from such corporate
sponsorship.
 
    
    Offline CD distribution.Upon launching a new album, our affiliated music companies
will distribute the album in CD format through traditional offline channels, which
primarily consists of the tens of thousands of retail stores in China specializing in
audio and video media products. As is customary in the industry, our affiliated music
companies enter into distribution agreements with major offline distributors or retail
chains. Such agreements typically include an upfront minimum license fee, plus royalties
paid to the record companies based on sales. Offline CD distribution channels in China
have been seriously affected, however, by piracy issues, and we believe that only a small
portion of all CD sales in China are from copyrighted sales which generate royalty
payments for the record companies.
 
    
    Music and Artist Agency Services.We endeavor through our music artist agency
business to find, develop and retain recording artists who will achieve long-term
profitable success.
 Our Online Video Business
  
    
    Direct Advertising. We engage in direct advertising in print, radio and TV media to
market and promote our online video products. We believe that direct advertising is one of
the most effective ways to market and promote our services to Internet users.
 
    
    Online Advertising.We engage in online advertising on other websites with user bases
similar to our own or likely to watch online videos.
 
    
    Sales Co-promotion.We develop integrated sales campaigns with traditional media
companies and multinational corporations. For example, in March 2010, we co-sponsored,
along with Shanda and five other companies, the Go Campus Angels! beauty contest which
sought to find the most beautiful, talented and energetic college students in China.
 
    
    Promotional Events.We organize and run a number of online promotional events which
we believe help create brand awareness by associating the Ku6 brand with well-known and
respected organizations and events in China. For example, in 2009, Ku6.com (i) became the
official video sharing website for an internet audition of volunteers for the World
Exposition 2010 Shanghai, (ii) jointly created with the China Green Foundation a program
to promote environmentally-friendly life styles through its online resources and (iii)
held the second China Online Video Awards Ceremony in Beijing.
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Customer Service
  Infrastructure and Technology
  
    
    develop and deliver our WVAS which are (or may in the future be) provided through
networks of China Mobile, China Unicom and China Telecom; and
 
    
    maintain our internal billing and transmission records.
     
 Seasonality
  Competition
 Wireless Value-Added Services
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Our Music and Artist Agency Business
   Our Online Video Business
  Government Regulation
  Regulation of Telecommunication and Internet Content Services
   
    
    Telecommunications Regulations(2000), or the Telecom Regulations, categorize all
telecommunications businesses in the PRC as either basic or value-added. Internet content
services, or ICP services, are classified as value-added telecommunications businesses.
Under the Telecom Regulations, commercial operators of value-added telecommunications
services must first obtain an operating license from the MIIT or its provincial level
counterparts.
 
    
    Administrative Measures on Internet Information Services(2000), or the Internet
Measures. According to the Internet Measures, commercial ICP service operators must obtain
an ICP license from the relevant government authorities before engaging in any commercial
ICP operations within the PRC.
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
    
    Administrative Measures for Telecommunications Business Operating License(2009,
revised), or the Telecom License Measures. The Telecom License Measures set forth the
types of licenses required to operate value-added telecommunications services and the
qualifications and procedures for obtaining such licenses. For example, an ICP operator
providing value-added services in multiple provinces is required to obtain an
inter-regional license, whereas an ICP operator providing the same services in one
province is required to obtain a local license.
 
    
    Regulations for the Administration of Foreign-Invested Telecommunications Enterprises
(2008, revised), or the FI Telecom Regulations. The FI Telecom Regulations set forth
detailed requirements with respect to capitalization, investor qualifications and
application procedures in connection with the establishment of a foreign-invested telecom
enterprise. Under the FI Telecom Regulations, a foreign entity is prohibited from owning
more than 50% of the total equity in any value-added telecommunication services business
in China. To comply with these restrictions, we have entered into a series of agreements
with each of our VIEs and their respective shareholders. We hold no ownership interest in
any such VIEs.
 
    
    Notice on Intensifying the Administration of Foreign Investment in Value-added
Telecommunications Services(2006). Under this notice, an operating company holding a
value-added telecommunications license (and not its shareholders) must own all related
Internet domain names and registered trademarks. In addition, such companys business site
and equipment should comply with its approved licenses, and the company should establish
and audit its internal Internet and information security policies and standards and
emergency management procedures.
 
    
    Notice Concerning Short Message Services(2004), Under this Notice, telecom operators
may only cooperate with licensed information service providers for SMS. This Notice sets
forth requirements for provision of SMS by information service providers with respect to
pricing, content and method of service provision. Certain types of SMS require customers
explicit confirmation on acceptance of charges before such services could be billed for.
This Notice also sets forth a high standard for customer services provided by information
service providers and requires the service providers to provide an easy and clear
cancellation mechanism for their customers to cancel subscribed services.
 
    
    Notice Concerning the Pricing and Billing of Mobile Information Services(2006).
Under this notice, the pricing and billing of WVAS must be accurate, clear and fair. In
addition, a WVAS provider cannot charge a customer unless the customer responds to two
customer requests, and it must maintain detailed invoices for each customer for more than
five months. In turn, the telecom operators are required to first deal with customer
complaints, requests for refunds and related matters.
 
    
    Notice Concerning the Billing of Telecommunications Services(2007). Under this
notice, no telecommunication enterprise may activate any service or function directly
connected to their platforms, such as call reminder and voice inbox functions, unless the
customer affirmatively consents to subscribing to them. For any free trial service
subscribed by the mobile phone user, upon expiration of the free trial period, service
providers may not charge the mobile phone user any fee for such service or function until
the user re-confirms that it wishes to continue such service or function. When a customer
calls the customer support line of a service provider, the service provider is prohibited
from charging the customer a fee for such call unless the customer expressly confirms its
consent to such charge regardless of whether automated or live support is provided. If
automated support is provided, the customer is required to be furnished with pricing and
billing information through a free voice notice.
  Regulation for Internet Publication. Internet Publication Tentative
Administrative Measures  
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Regulation for Internet News Dissemination. 
 Regulation for Internet Games and Culture Activities. Internet Culture Administration Tentative Measures
 Regulation for Internet Audiovisual Program Services Rules for
the Administration of Internet Audiovisual Program Services
 Regulation of Internet content services.
  
    
    opposes the fundamental principles determined in Chinas Constitution;
 
    
    compromises state security, divulges state secrets, subverts state power or damages
national unity;
 
    
    harms the dignity or interests of the state;
 
    
    incites ethnic hatred or racial discrimination or damages inter-ethnic unity;
 
    
    sabotages Chinas religious policy or propagates heretical teachings or feudal
superstitions;
 
    
    disseminates rumors, disturbs social order or disrupts social stability;
 
    
    propagates obscenity, pornography, gambling, violence, murder or fear or incites the
commission of crimes;
 
    
    insults or slanders a third party or infringes upon the lawful rights and interests
of a third party; or
 
    
    includes other content prohibited by laws or administrative regulations.
   50




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Copyright
 Regulation of advertisements.
     Regulation on Information Security.
    51




---



##### Table of Contents



Regulations on Internet Privacy.
 Restrictions on Foreign Ownership in Value-Added Telecommunications Services.
 Regulation on Broadcasting Audio/Video Programs through the Internet.
    52




---



##### Table of Contents



Regulation of Music Production
   Copyright
 Certification and Licensing System. Regulations of the Phonographic Products and the Measures on
Wholesaling, Retailing and Renting of the Phonographic Products Opinions on
Regulation and Development of Music Transmitted via Network Regulations on
the Commercial Performance and its Implementing Provisions (2004) and Measures on the Professional
Intermediaries
  Regulation of Artist Agency. Regulations for the Administration of Commercial Performances
 Copyright
    53




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##### Table of Contents



Interim Provisions on
Compulsory License of Performance Regulations on
Protection of Information Network Transmission Right
  54




---



##### Table of Contents



Other Laws and their Application
 Trademark.
  Foreign exchange controls.
 Dividend Distribution.
 Wholly Foreign Owned Enterprise Law (1986), as amended;
 Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
 Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended;
 Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended;
 PRC Enterprise Income Tax Law (2007); and
 Implementation Rules of the PRC Enterprise Income Tax Law (2007).
  Regulations on Labor.
 Regulations on Taxation.
 Intellectual Property and Proprietary Rights
   55




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##### Table of Contents



hurray.com;
hurraygroup.com; huayou.net.cn; icu.net.cn; coowap.net;i132.com; 91wap.net, m2me.com and Ku6.com
    C. Organizational Structure
  1.
    
    Hurray! Solutions is 85% and 15% owned by Qindai Wang, and Songzuo Xiang,
respectively.
 2.
    
    Beijing Network is 50% owned by each of Li Xun and Hongmei Peng, two individuals in
China.
 3.
    
    WVAS Solutions is 99% owned by Beijing Network, with the remaining 1% equally owned
by Hao Sun and Xiaoping Wang.4.
    
    Beijing Palmsky is 50% and 50% owned by two individuals in China, Hong Liu and Haoyu Yang.5.
    
    Beijing Hutong is 50% and 50% owned by two individuals in China, Wenqian Xu and Yi Cai.6.
    
    Shanghai Magma is 50% and 50% owned by two individuals in China, Yi Zhang and Aiqin Shang.7.
    
    Hengji Weiye is 50% and 50% owned by two individuals in China, Hong Pan and Xiaoqing Guo.
 8.
    
    Shanghai Saiyu is 50% and 50% owned by two individuals in China, Liang Ruan and Yuqi
Shi.
 9.
    
    Henan Yinshan is 50% and 50% owned by two individuals in China, Hua Wei and Yidan
Jiang.
 10.
    
    Xifule is 50% and 50% owned by two individuals in China, Tan Jingling and Yao
Lijuan.
 11.
    
    Ku6 Information is 50% and 50% owned by two individuals in China, Li Shanyou and
Han Hailong.
 12.
    
    Tianjin Ku6 is 100% owned by Ku6 Information.
   56




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57




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58




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##### Table of Contents



D. Property, Plant and Equipment
    
 Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
  A. OPERATING RESULTS
 Overview
  
    
    WVAS Services. We provide a wide range of WVAS to mobile users in China, including
music, games, pictures and animation, community, and other media and entertainment
services. Our services are offered through the various service platforms available on
the 2G and 2.5G networks operated by the mobile telecommunication network operators in
China, principally China Mobile, China Unicom and increasingly, China Telecom. Many of
our services are also available to users in China through our Hurray! website.
 
    
    Music Business. We are a leader in artist development, music production and
offline distribution in China through our affiliated music companies, Huayi Brothers
Music, Freeland Music, New Run, Secular Bird and Seed Music Group, which also operates
in Taiwan.
 
    
    Online Video Business. We entered the online video market in January 2010 when we
acquired Ku6, one of the leading online video portals in China. Ku6.com hosts
professionally-produced and user-generated video content from a network of media
partners in China, around Asia and from around the world. Our online video business
derives its revenue principally from advertising. The acquisition of Ku6 will affect
our operating and financial results going forward.
   59




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Factors Affecting Results of Operations and Financial Condition
  
    
    Growth of the WVAS Market in China and Changes in Mobile Operator Policies. Our
financial results have been, and we expect them to continue to be, largely dependent on
growth in the WVAS market in China. Historically, 2G and 2.5G services, such as SMS, have
represented the predominant portion of the WVAS market in China and of our revenues. We
commercially launched 2.5G services in September 2002 and began billing users for these
services at the beginning of 2003. Since the launch of these 2G and 2.5G services, we
initially experienced significant growth in revenues from these services, followed by a
significant decline in revenues for these services over the past three years. The
important factors causing this decline have been the changes in the telecom operator
policies or the manner in which they are enforced in 2008 and 2009. Such policy changes
and their manner of enforcement have been frequent and unpredictable for the past three
years and have caused our revenues to be volatile. See Item 3. Risk Factors  a Company
Unilateral changes in the policies of the MII, China Mobile and China Unicom and in their
enforcement of their policies have resulted in service suspensions and our having to pay
additional charges to the telecom operators, and further changes could materially and
adversely impact our revenue and profitability in the future. Although we have been
adversely affected by changes in telecom operator policies and the delay in the expansion
of 2.5G networks by the telecom operators in 2008 and 2009 and in the launch of 3G
networks in China, we continue to believe that our financial success in the near-term will
depend on the growth of the market for our 2G and 2.5G services, especially services
utilizing music content, where we have a leading position and, in the longer-term, on our
ability to offer popular services on any new wireless technologies that are introduced in
China such as 3G.
 
    
    Positioning of Our Services on the WAP Portals of the Telecom Operators.A key
component of our revenue growth is our ability to not only maintain access to China
Unicoms and China Mobiles networks and now to China Telecoms networks following that
companys acquisition of one of China Unicoms networks, but also our ability to secure
prominent positioning for our services at the top of the menu of services for each major
service category on the telecom operators WAP portals so that users see our services
first when opening the service menus.
 
    
    Network Service Agreements with the Telecom Operators.Our results of operations are
dependent on the terms of network service agreements with the telecom operators and the
manner in which the telecom operators implement these agreements. Each of these agreements
is non-exclusive, and has a limited term, generally one or two years. Renewal of them on
favorable terms depends on our relationship with these telecom operators at both the
national and provincial level, the popularity of our services and our ability to maintain
adequate levels of performance. Any mobile operator could alter any of these terms or
terminate the contracts for a variety of reasons in the future, including, for example, to
increase their own service or network fees in order to enhance their profitability at the
expense of service providers.
 
    
    Billing and Transmission Failures. We do not recognize any revenues for services that
are characterized as billing and transmission failures. We can not collect fees when these
failures occur for our 2G services from telecom operators, which arise in a number of
circumstances, including when the delivery of our services to a customer is prevented
because the customers phone is off, the customers prepaid phone card has run out of
value or a mobile operator experiences technical problems with its network. These
situations are known in the industry as billing and transmission failures. The level of
billing and transmission failures significantly affects revenues we record.
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
    
    Acquisitions, Strategic Investments and Divestitures.Selective acquisitions and
strategic investments, such as the ones described in Item 4.A. History and Development of
the Company above, form part of our strategy to further expand
our business. These acquisitions and investments may not produce the results that our
management and board of directors anticipate, and may subject our company to unforeseen
liabilities. In particular, our future revenue growth will depend on our ability to
successfully integrate Ku6, which we acquired in January 2010, and operate its online video
business, with which we have relatively limited experience. We may also sell businesses or
assets as part of our strategy or if we receive offers from other parties. If we do so, we
may sell an asset or business for less than its full value or may lose valuable
opportunities attendant to such asset or business.
 
    
    Developing Artists, Sustaining a Pipeline of New Song Releases and Keeping up with
Consumer Music Tastes.Through our acquisition of controlling and minority stakes in Huayi
Brothers Music, Freeland Music, New Run and Secular Bird, and Seed Music Group, we have
entered the business of artist development and music production. Artist development and
music production is inherently a hit driven business, and its success depends to a large
extent on our ability to maintain a large portfolio of talented singing artists and build
a strong pipeline of new song releases. Further, the success of such new releases depends
upon their acceptance by consumers with various and changing tastes. If our affiliated
music companies fail to expand their portfolio of talented singing artists, sustain a
pipeline of new releases, or keep abreast of changes in consumer music tastes, our
business and financial condition may be adversely affected with respect to the financial
performance of our affiliated music companies.
 
    
    Developing and Obtaining Online Video Content and Attracting Advertisers.Through our
acquisition of Ku6, we have entered the online video business. Ku6 principally derives
revenue from online marketing services. Advertisers are generally unwilling to run
advertisements on sites that contain unlicensed content for fear of becoming subject to
lawsuits concerning intellectual property. Our online video business therefore
increasingly relies on third party relationships to attract traffic and provide content.
These arrangements usually provide for short-term relationship with a limited period of
exclusive use. We may allocate a significant portion of our working capital to the
finance such acquisitions of video content, working capital which would otherwise be
available for our other business segments. Our results of operation will be affected if
the revenue derived from our online marketing services is not sufficient to offset the
cost of acquiring legally licensed content.
 Revenues
   For the Year Ended December 31,2009
    
    
    2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    PercentageAmount
    
    
    of revenues
    
    
    Amount
    
    
    of revenues
    
    
    Amount
    
    
    of revenues(in thousands of U.S. dollars, except percentages)Revenues:Wireless
value-added
services
    
    $
    20,169
    
    
    
    58.2
    %
    
    $
    42,672
    
    
    
    79.1
    %
    
    $
    50,038
    
    
    
    82.7
    %Recorded music
    
    
    14,473
    
    
    
    41.8
    %
    
    
    11,287
    
    
    
    20.9
    %
    
    
    10,489
    
    
    
    17.3
    %Total revenues
    
    $
    34,642
    
    
    
    100.0
    %
    
    $
    53,959
    
    
    
    100.0
    %
    
    $
    60,527
    
    
    
    100.0
    %
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For the Year Ended December 31, 2009China
    
    
    China
    
    
    China
    
    
    ChinaMobile
    
    
    Unicom
    
    
    Telecom
    
    
    Netcom
    
    
    Others
    
    
    Total(in millions of U.S. dollars)SMS
    
    $
    3.0
    
    
    $
    1.5
    
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.6
    
    
    $
    5.3IVR
    
    
    1.4
    
    
    
    1.0
    
    
    
    1.4
    
    
    
    
    
    
    
    0.1
    
    
    
    3.9RBT
    
    
    2.3
    
    
    
    1.6
    
    
    
    0.6
    
    
    
    
    
    
    
    0.1
    
    
    
    4.62G Revenues
    
    
    6.7
    
    
    
    4.1
    
    
    
    2.2
    
    
    
    
    
    
    
    0.8
    
    
    
    13.8WAP
    
    
    0.4
    
    
    
    0.9
    
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    3.1MMS
    
    
    1.5
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    1.7Java
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.62.5G revenues
    
    
    3.5
    
    
    
    0.9
    
    
    
    2.0
    
    
    
    
    
    
    
    
    
    
    
    6.4Other revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    10.2
    
    
    $
    5.0
    
    
    $
    4.2
    
    
    $
    
    
    
    $
    0.8
    
    
    $
    20.2
 For the Year Ended December 31, 2008China
    
    
    China
    
    
    China
    
    
    ChinaMobile
    
    
    Unicom
    
    
    Telecom
    
    
    Netcom
    
    
    Others
    
    
    Total(in millions of U.S. dollars)SMS
    
    $
    9.5
    
    
    $
    2.4
    
    
    $
    0.4
    
    
    $
    0.1
    
    
    $
    0.9
    
    
    $
    13.3IVR
    
    
    7.2
    
    
    
    1.3
    
    
    
    3.2
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    12.2RBT
    
    
    2.6
    
    
    
    1.9
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    5.02G Revenues
    
    
    19.3
    
    
    
    5.6
    
    
    
    4.1
    
    
    
    0.3
    
    
    
    1.2
    
    
    
    30.5WAP
    
    
    2.1
    
    
    
    4.7
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    7.4MMS
    
    
    0.8
    
    
    
    0.5
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    1.4Java
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    2.3WEB
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.22.5G revenues
    
    
    5.1
    
    
    
    5.2
    
    
    
    0.9
    
    
    
    
    
    
    
    0.1
    
    
    
    11.3Other revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    0.9Total
    
    $
    24.4
    
    
    $
    10.8
    
    
    $
    5.0
    
    
    $
    0.3
    
    
    $
    2.2
    
    
    $
    42.7
 For the Year Ended December 31, 2007China
    
    
    China
    
    
    China
    
    
    ChinaMobile
    
    
    Unicom
    
    
    Telecom
    
    
    Netcom
    
    
    Others
    
    
    Total(in millions of U.S. dollars)SMS
    
    $
    7.0
    
    
    $
    2.5
    
    
    $
    0.2
    
    
    $
    0.3
    
    
    $
    1.0
    
    
    $
    11.0IVR
    
    
    13.3
    
    
    
    1.2
    
    
    
    2.4
    
    
    
    0.3
    
    
    
    
    
    
    
    17.2RBT
    
    
    1.6
    
    
    
    1.7
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    3.72G Revenues
    
    
    21.9
    
    
    
    5.4
    
    
    
    3.0
    
    
    
    0.6
    
    
    
    1.0
    
    
    
    31.9WAP
    
    
    5.9
    
    
    
    6.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.6MMS
    
    
    0.7
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4Java
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4WEB
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    
    
    
    
    2.02.5G revenues
    
    
    8.0
    
    
    
    7.4
    
    
    
    2.0
    
    
    
    
    
    
    
    
    
    
    
    17.4Other revenues
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    0.7Total
    
    $
    30.0
    
    
    $
    12.8
    
    
    $
    5.0
    
    
    $
    0.6
    
    
    $
    1.6
    
    
    $
    50.0
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Wireless Value-added Services TM
 Recorded Music
 Cost of Revenues
  For the Year Ended December 312009
    
    
    2008
    
    
    2007(in thousands of U.S. dollars)Cost of Revenues:Wireless value-added services
    
    $
    15,332
    
    
    $
    32,840
    
    
    $
    36,394Recorded music
    
    
    12,625
    
    
    
    6,730
    
    
    
    6,233Total cost of revenues
    
    $
    27,957
    
    
    $
    39,570
    
    
    $
    42,627
 Wireless value-added services.
 Recorded Music
 Gross Profit Margin
  For the Year Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands of U.S. dollars, except percentages)Gross Profits:Wireless value-added services
    
    $
    4,837
    
    
    $
    9,832
    
    
    $
    13,644Recorded music
    
    
    1,848
    
    
    
    4,557
    
    
    
    4,256Total gross profits
    
    $
    6,685
    
    
    $
    14,389
    
    
    $
    17,900
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For the Year Ended December 31,2009
    
    
    2008
    
    
    2007Gross Profit Margin:Wireless value-added services
    
    
    24.0
    %
    
    
    23.0
    %
    
    
    27.3
    %Recorded music
    
    
    12.8
    %
    
    
    40.4
    %
    
    
    40.6
    %Total gross profit margin
    
    
    19.3
    %
    
    
    26.7
    %
    
    
    29.6
    %
  Operating Expenses
  For the Year Ended December 31,2009
    
    
    2008
    
    
    2007Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    PercentageAmount
    
    
    of revenues
    
    
    Amount
    
    
    of revenues
    
    
    Amount
    
    
    of revenues(in thousands of U.S. dollars, except percentages)Operating Expenses:Product development expenses
    
    $
    467
    
    
    
    1.3
    %
    
    $
    992
    
    
    
    1.8
    %
    
    $
    2,028
    
    
    
    3.4
    %Selling and marketing expenses
    
    
    6,330
    
    
    
    18.3
    
    
    
    9,132
    
    
    
    16.9
    
    
    
    11,514
    
    
    
    19.0General and administrative expenses
    
    
    22,992
    
    
    
    66.4
    
    
    
    11,984
    
    
    
    22.2
    
    
    
    9,141
    
    
    
    15.1Provision for goodwill impairment
    
    
    3,593
    
    
    
    10.4
    
    
    
    2,675
    
    
    
    5.0
    
    
    
    38,779
    
    
    
    64.1Gain on reduction of Unicom liability
    
    
    
    
    
    
    
    
    
    
    (1,557
    )
    
    
    (2.9
    )
    
    
    
    
    
    
    Gain from reversed litigation expenses
    
    
    
    
    
    
    
    
    
    
    (557
    )
    
    
    (1.0
    )
    
    
    
    
    
    
    Total operating expenses
    
    $
    33,382
    
    
    
    96.4
    %
    
    $
    22,669
    
    
    
    42.0
    %
    
    $
    61,462
    
    
    
    101.6
    %
 Product Development Expenses
 Selling and Marketing Expenses
 General and Administrative Expenses
    64




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Stock-based Compensation.
      Provision for Impairment of Goodwill and Intangible Assets.
      65




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##### Table of Contents



Gain on Reduction of Unicom Liability.
 Gain from Reversed Litigation Expenses.
 Gain on reduction of acquisition payable.
 Foreign exchange loss
 Critical Accounting Policies
  Business combinations and non-controlling interests
      66




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Revenue Recognition
     
    
    we are the primary obligor in the arrangement;
 
    
    we are able to establish prices within price caps prescribed by
the telecom operators to reflect or react to changes in the
market;
 
    
    we determine the service specifications of the services we will be rendering;
 
    
    we are able to control the selection of our content suppliers; and
 
    
    the telecom operators usually will not pay us if users cannot be
billed or if users do not pay the telecom operators for services
delivered and, as a result, we bear the delivery and billing risks
for the revenues generated with respect to our services.
    67




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Recorded Music
      Stock-based Compensation Cost
    68




---



##### Table of Contents



Impairment of Investments in Affiliated Companies
  Goodwill and Intangible Assets Impairment
      69




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##### Table of Contents



Income Taxes and Valuation allowances
        70




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Results of Operations
  Year Ended December 31, 2009 Compared with Year Ended December 31, 2008
 Revenues.
 Wireless Value-added Services
 Recorded Music.
 Cost of Revenues.
 Wireless value-added Services
 Recorded Music.
 Gross Profits.
 Operating Expenses
 Product Development Expenses.
 Selling and Marketing Expenses
 General and Administrative Expenses
  71




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Provision for Impairment of Goodwill. Operating loss from Continuing Operations.
 Interest Income and Expense
 Foreign Exchange loss.
 Other Income
 Income Taxes.
 Equity in loss of affiliated company
 Impairment of Investment in affiliated company.
 Net Loss from Continuing Operations. .
 Net Income from Discontinued Operations
 Net Loss
 Net Loss attributable to the non-controlling interests and redeemable non-controlling interest
 Net Loss attributable to Hurray! Holding Co., Ltd.
  72




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Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
 Revenues.
 Wireless Value-added Services
 Recorded Music.
 Cost of Revenues.
 Wireless value-added Services
 Recorded Music.
 Gross Profits.
 Operating Expenses
 Product Development Expenses.
 Selling and Marketing Expenses
 General and Administrative Expenses
 Provision for Impairment of Goodwill.
 Loss from Continuing Operations.
 Interest Income and Expense
 Foreign Exchange loss.
  73




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##### Table of Contents



Other Income
 Income Taxes.
 Equity in Results of Affiliate
 Impairment of Investment in Music Affiliate.
 Net Loss from Continuing Operations. .
 Net Income from Discontinued Operations
 Net Loss
 Net Loss (income) attributable to the non-controlling interests and redeemable non-controlling
interest
 Net Loss attributable to Hurray! Holding Co., Ltd.
 B. LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows and Working Capital
  For the Year Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands of U.S. dollars)Net cash (used in) provided by operating activities
    
    $
    (1,455
    )
    
    $
    (5,553
    )
    
    $
    (2,055
    )Net cash used in investing activities
    
    
    (9,376
    )
    
    
    (2,265
    )
    
    
    (8,120
    )Net cash provided by (used in) financing activities
    
    
    3
    
    
    
    2
    
    
    
    16Net (decrease) in cash and cash equivalents
    
    $
    (10,828
    )
    
    $
    (7,816
    )
    
    $
    (10,159
    )
   74




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75




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##### Table of Contents



Indebtedness
  C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
   D. TREND INFORMATION
  E. OFF-BALANCE SHEET ARRANGEMENTS
  F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
  Payments Due by PeriodLess than
    
    
    1-3
    
    
    3-5Total
    
    
    1 year
    
    
    years
    
    
    years(in thousands of U.S. dollars)Operating lease commitments
    
    $
    862
    
    
    $
    492
    
    
    $
    370
    
    
    $
    Other contractual commitments*
    
    
    2,024
    
    
    
    852
    
    
    
    1,172
    
    
    
    Total contractual obligations
    
    $
    2,886
    
    
    $
    1,344
    
    
    $
    1,542
    
    
    $
    
 
 *
    
    Represents non-cancelable agency agreements with certain artists that provide for minimum
payments.  Contingent Acquisition Payments
   76




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##### Table of Contents



Holding Company Structure
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Exchange Risk
   Inflation
   77




---



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Credit Risk
  TAXATION
       78




---



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RECENTLY ISSUED ACCOUNTING STANDARDS
       79




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 A. Directors and Senior Management
  Name
    
    Age
    
    PositionTianqiao Chen(1)
    
    36
    
    Director and Chairman of the BoardDanian Chen
    
    31
    
    DirectorGrace Wu (1)
    
    39
    
    DirectorHaifa Zhu (1)
    
    37
    
    DirectorHaibin Qu
    
    36
    
    Director and acting Chief Executive OfficerShanyou Li
    
    37
    
    Director and CEO of Ku6Zheng Wu(2)
    
    43
    
    DirectorTongyu Zhou(2)
    
    41
    
    DirectorWenwen Niu(2)
    
    45
    
    DirectorLi Yao
    
    36
    
    Acting Chief Financial OfficerHaoyu Yang
    
    38
    
    Executive Vice PresidentYanmei Zhang
    
    45
    
    Executive Vice PresidentJianwu Liang
    
    29
    
    Chief Technology Officer and Senior Vice President
 
 (1)
    
    Member of the compensation committee(2)
    
    Member of the audit committee  80




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##### Table of Contents



Biographical Information
 Tianqiao Chen.
 DaNian Chen.
 Grace Wu.
 Haifa Zhu.
 Haibin Qu.
 Shanyou Li.
 Zheng Wu
 Tongyu Zhou.
  81




---



##### Table of Contents



Wenwen Niu.
 Li Yao
 Yanmei Zhang.
 Haoyu Yang.
 Jianwu Liang
 B. Compensation
 Compensation of Directors and Executive Officers
      82




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##### Table of Contents



Employment Agreements
    
    
    dishonesty,
 
    
    fraud,
 
    
    breach of trust,
 
    
    physical harm to any person,
 
    
    breach of the employment agreement, or
 
    
    other similar conduct.
  
    
    changes in the officers position, which materially reduce his level of
responsibilities, duties or stature, or
 
    
    a reduction in the officers compensation.
    Summary of Stock Plans
 2004 Share Incentive Plan
   
    
    our ordinary shares,
 
    
    options to purchase our ordinary shares,
 
    
    dividend equivalent rights, the value of which is measured by the dividends paid with
respect to our ordinary shares,
 
    
    non-vested shares,
  83




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##### Table of Contents




    
    stock appreciation rights the value of which is measured by appreciation in the value
of our ordinary shares, and
 
    
    any other securities the value of which is derived from the value of our ordinary
 shares and which can be settled for cash, our ordinary shares or other securities or a
combination of cash, our ordinary shares or other securities.
  Plan Administration.
 Eligibility.
 Acceleration of Awards upon Corporate Transactions or Changes in Control.
 Awards.
 Exercise or Purchase Price and Term of Awards.
   Transferability.
 Termination of Service.
  84




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##### Table of Contents



Amendment or Termination of 2004 Plan.
 C. Board Practices
        D. Employees
  E. Share Ownership
  
    
    all persons who are beneficial owners of five percent or more of our ordinary shares;
 
    
    our current executive officers and directors; and
 
    
    all current directors and executive officers as a group.
  85




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##### Table of Contents



Number of SharesBeneficially OwnedName
    
    Number
    
    
    Percentage5% and above ShareholdersShanda Interactive Entertainment Ltd
    
    
    1,233,161,592
    
    
    
    41.97
    %Romasco Place, Wickhams Cay 1, P.O.
Box 3140, Road Town, Tortola, British
Virgin Islands, VG1110(1)Granite Global Ventures
    
    
    256,850,015
    
    
    
    8.74
    %2494 Sand Hill Road
Suite 100 Menlo Park, CA 94025 United
States(2)Executive Officers and Directors(3)Shanyou Li(3)
    
    
    274,077,076
    
    
    
    9.33
    %Tianqiao Chen
    
    
    
    
    
    
    Danian Chen
    
    
    
    
    
    
    Grace Wu
    
    
    
    
    
    
    Haifa Zhu
    
    
    
    
    
    
    Haibin Qu
    
    
    
    
    
    
    Shanyou Li
    
    
    
    
    
    
    Zheng Wu
    
    
    
    
    
    
    Tongyu Zhou
    
    
    
    
    
    
    Wenwen Niu
    
    
    
    
    
    
    Li Yao
    
    
    
    
    
    
    Haoyu Yang
    
    
    
    
    
    
    Yanmei Zhang
    
    
    
    
    
    
    Jianwu Liang
    
    
    
    
    
    
    All current directors and executive officers
as a group (11 persons)
    
    
    274,077,076
    
    
    
    9.33
    %
 
 *
    
    Upon exercise of all options currently exercisable or vesting within 60 days of the date of
this table, would beneficially own less than 1% of our ordinary shares. (1)
    
    Shanda Interactive Entertainment Ltd, through Shanda Music Group Limited accepted
1,155,045,300 Shares (including Shares represented by ADSs) by Tender Offer Agreement among
Shanda Interactive Entertainment Ltd, Shanda Music Group Limited and Hurray! Holding Co., Ltd.
dated as of June 8, 2009. On September 18, 2009, Shanda Music Group Limited acquired
additional 78,116,292 Shares (including Shares presented by ADSs) pursuant to the Share
Transfer Agreements.
 (2)
    
    Granite Global Ventures is an investment adviser.
 (3)
    
    Includes (i) 257,106,176 ordinary shares held by KUMELLA HOLDINGS LIMITED, (ii) 8,999,200
ordinary shares held by Li Shanyou, and (iii) 79,717 American Depositary Shares held by Li
Shanyou, each representing 100 ordinary shares of the Issuer. KUMELLA HOLDINGS LIMITED is a
British Virgin Islands company, with Li Shanyou holding approximately 88.27% of its equity
interest and other three individuals holding the remaining 11.73% of its equity interest. In
addition, each of such three individual shareholders of KUMELLA HOLDINGS LIMITED has granted a
power of attorney to the board of directors of KUMELLA HOLDINGS LIMITED to exercise the voting
rights with respect to shares held by such individual shareholder. Li Shanyou is currently
serving as the sole director on the board of
KUMELLA HOLDINGS LIMITED. Therefore, Li Shanyou may be deemed to share the power to vote and
dispose or direct the disposition of 257,106,176 ordinary shares of the Issuer held by KUMELLA
HOLDINGS LIMITED.
  86




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Item 7. Major Shareholders and Related Party Transactions
 A. Major Shareholders
  B. Related Party Transactions
 Related Party Transactions
   Powers of Attorney.
  Operating Agreements.
  87




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##### Table of Contents



Exclusive Technical Consulting and Services Agreements.
 Software Transfer Agreements and Software License Agreements.
 Contracts Relating to the Exclusive Purchase Right of Equity Interest.
 Equity Interests Pledge Agreements.
 Music License Agreements
 Business Cooperation Agreements with Shanda
   Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009Consulting, royalty and artist performance fee from Huayi
Brothers Media Corporation
    
    
    26,087
    
    
    
    281,795
    
    
    
    Consulting, production and marketing service fee from Huayi
Brothers Times Culture Broker Co., Ltd.
    
    
    
    
    
    
    
    
    
    
    281,580Royalty revenue from Shanghai Haiyue Music Distribution
Co., Ltd.
    
    
    185,510
    
    
    
    120,129
    
    
    
    Royalty revenue from Beijing Oriental Freeland Film Media
Co., Ltd.
    
    
    
    
    
    
    128,995
    
    
    
    CD distribution revenue from Beijing Century Freeland Film
Media Co., Ltd.
    
    
    262,520
    
    
    
    35,625
    
    
    
    52,248Royalty revenue from Guangdong Freeland Film Media Co., Ltd.
    
    
    64,450
    
    
    
    
    
    
    
    Royalty revenue from New Run
    
    
    106,567
    
    
    
    
    
    
    
    645,134
    
    
    
    566,544
    
    
    
    333,828
  88




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##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009Content purchase, minimum guarantee and trade-name
usage fee to Huayi Brothers Media Corporation
    
    
    80,285
    
    
    
    58,501
    
    
    
    208,663Content purchase and information service fee to New Run
    
    
    16,440
    
    
    
    26,771
    
    
    
    15,053Expenses paid on behalf of Beijing Secular Bird
Culture Art Development Center
    
    
    
    
    
    
    19,009
    
    
    
    96,725
    
    
    
    104,281
    
    
    
    223,716
   
 Item 8. Financial Information
 A. Consolidated Statements and Other Financial Information
  A.7 Legal Proceedings
  A.8 Dividend Policy
  B. Significant Changes
  
 Item 9. The Offer and Listing
    89




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##### Table of Contents



Sales PriceHigh
    
    
    LowAnnual highs and lows2005 (February 4, 2005 through December 31, 2005)
    
    $
    11.80
    
    
    $
    7.672006
    
    $
    9.71
    
    
    $
    4.702007
    
    $
    6.53
    
    
    $
    3.052008
    
    $
    4.21
    
    
    $
    1.082009
    
    $
    2.28
    
    
    $
    0.93Quarterly highs and lowsFirst Quarter 2008
    
    $
    4.21
    
    
    $
    2.36Second Quarter 2008
    
    $
    3.30
    
    
    $
    2.61Third Quarter 2008
    
    $
    3.19
    
    
    $
    2.21Fourth Quarter 2008
    
    $
    2.75
    
    
    $
    1.08First Quarter 2009
    
    $
    2.04
    
    
    $
    0.93Second Quarter 2009
    
    $
    4.00
    
    
    $
    0.95Third Quarter 2009
    
    $
    3.95
    
    
    $
    3.25Fourth Quarter 2008
    
    $
    7.16
    
    
    $
    3.85First Quarter 2010
    
    $
    4.50
    
    
    $
    2.22Second Quarter 2010 (April 1, 2010 through April 23, 2010)
    
    $
    3.57
    
    
    $
    3.03Monthly highs and lowsOctober 2009
    
    $
    7.16
    
    
    $
    3.85November 2009
    
    $
    6.15
    
    
    $
    4.63December 2009
    
    $
    4.90
    
    
    $
    3.89January 2010
    
    $
    4.50
    
    
    $
    3.50February 2010
    
    $
    3.85
    
    
    $
    2.22March 2010
    
    $
    3.85
    
    
    $
    2.84April 2010 (April 1, 2010 through 23, 2010)
    
    $
    3.57
    
    
    $
    3.03
 
 Item 10. Additional Information
 A. Share Capital
  B. Memorandum and Articles of Association
  C. Material Contracts
  D. Exchange Controls
  
    
    Notice on Issues Relating to the Administration of Foreign Exchange in Fundraising and
Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose
Companies;
 
    
    Foreign Currency Administration Rules (1996), as amended, or the Exchange Rules; and
 
    
    Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or
the Administration Rules.
   90




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91




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##### Table of Contents



E. Taxation
  Cayman Islands Taxation and Exchange Control
  (i)
    
    that no law which is enacted in the Cayman Islands imposing any tax to be
levied on profits, income or gains or appreciations shall apply to our company or its
operations; and
 (ii)
    
    in addition, that no tax be levied on profits, income gains or appreciations or
which is in the nature of estate duty or inheritance tax shall be payable by our
company:
 (a)
    
    on or in respect of the shares, debentures or other obligations of our
company; or
 (b)
    
    by way of withholding in whole or in part of any relevant payment as
defined in section 6(3) of the Tax Concessions Law (1999 Revision).
   Peoples Republic of China Taxation
  United States Federal Income Taxation
     92




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##### Table of Contents



This summary is not a comprehensive description of all of the U.S. federal tax consequences
that may be relevant with respect to the ownership and disposition of ordinary shares or ADSs. We
urge you to consult your own tax advisor regarding your particular circumstances and the U.S.
federal income and estate tax consequences to you of owning and disposing of ordinary shares or
ADSs, as well as any tax consequences arising under the laws of any state, local, foreign or other
tax jurisdiction and the possible effects of changes in U.S. federal or other tax laws.
  
    
    a citizen or resident of the United States;
 
    
    a corporation, or other entity taxable as a corporation, created or organized in or
under the laws of the United States, any state therein or the District of Columbia; or
 
    
    an estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source.
     TAXATION OF U.S. HOLDERS
 Passive Foreign Investment Company
     93




---



##### Table of Contents




    
    any excess distribution paid on ordinary shares or ADSs (or by a Lower-tier
PFIC to its shareholder that is deemed to be received by a U.S. Holder), which means
the excess (if any) of the total distributions received (or deemed received) by you
during the current taxable year over 125% of the average distributions received (or
deemed received) by you during the three preceding taxable years (or during the portion
of your holding period for the ordinary shares or ADSs prior to the current taxable
year, if shorter); and
 
    
    any gain realized on the sale or other disposition (including a pledge) of
ordinary shares or ADSs (or on an indirect disposition of shares by a Lower-tier PFIC).
  
    
    any excess distribution or gain will be allocated ratably over your holding
period for the ordinary shares or ADSs;
 
    
    the amount allocated to the current taxable year and any period prior to the
first day of the first taxable year in which we were a PFIC will be treated as ordinary
income in the current taxable year;
 
    
    the amount allocated to each of the other years will be treated as ordinary
income and taxed at the highest applicable tax rate in effect for that year; and
 
    
    the resulting tax liability from any such prior years will be subject to the
interest charge applicable to underpayments of tax.
 de minimis
   94




---



##### Table of Contents



Distributions on Ordinary Shares or ADSs
    Dispositions of Ordinary Shares or ADSs
     95




---



##### Table of Contents



Information Reporting and Backup Withholding
   Enforcement of Civil Liabilities
  
    
    political and economic stability;
 
    
    an effective judicial system;
 
    
    a favorable tax system;
 
    
    the absence of exchange control or currency restrictions; and
 
    
    the availability of professional and support services.
           96




---



##### Table of Contents



F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
  www.sec.gov
   I. Subsidiary Information
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 12. Description of Securities Other than Equity Securities
 D. American Depositary Shares
  ADR Fees Payable by Investors
   97




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##### Table of Contents



Persons depositing or withdrawing shares must pay:
    
    For:A fee not in excess of $5.00 per 100 ADSs
    
    
    
    Issuance of ADSs, including issuances resulting from a distribution of ordinary shares or rights or other property
    
    Cancellation or withdrawals of ADSs
    
    Distributions of securities other than ADSs or rights to purchase additional ADSsA fee not in excess of $2.00 per 100 ADSs
    
    
    
    Distributions of cash dividends or other cash distributions to holders of ADRs
    
    Annual depositary services, except to the extent of any cash dividend fee(s) chargedA fee not in excess of $1.50 per ADR
    
    
    
    Transfers of ADRsTaxes and other governmental charges the
depositary or the custodian have to pay
on any ADS or ordinary shares underlying
an ADS, for example, stock transfer
taxes, stamp duty or withholding taxes
    
    
    
    As necessaryAny charges, fees or expenses incurred 
by the depositary or its agents for 
servicing the deposited securities
    
    
    
    As necessary
 Payments Received
  
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
 Use of Proceeds
      98




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##### Table of Contents



Item 15. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control Over Financial Reporting
      
 Item 16. Reserved
  99




---



##### Table of Contents



Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  www.hurray.com
 
 Item 16C. Principal Accountant Fees and Services
 Disclosure of Fees Charged by Independent Accountants
  For the year endedDecember 31,2009
    
    
    2008Audit fees (1)
    
    $
    1,247,687
    
    
    $
    437,132Audit
related fees (2)
    
    
    
    
    
    
    Tax fees
(3)
    
    
    
    
    
    
    96,455All other
fees (4)
    
    
    41,233
    
    
    
    
 
 (1)
    
    Audit fees means the aggregate fees incurred in each of the fiscal years listed for our
calendar year audits and reviews of financial statements.(2)
    
    Audit-related fees means the aggregate fees incurred in each of the fiscal years listed for
professional services related to the audit of our financial statements that are not reported
under Audit fees and consultation on accounting standards or transactions.(3)
    
    Tax fees means the aggregate fees incurred in each of the fiscal years listed for
professional services rendered for tax compliance, tax advice and tax planning.(4)
    
    All other fees means the aggregate fees incurred in each of the fiscal years listed for
professional services rendered other than those reported under Audit fees, Audit-related
fees, and Tax fees. Audit Committee Pre-approval Policies and Procedures
  
    
    Any audit or non-audit service to be provided to us by the independent accountant
must be submitted to the audit committee for review and approval, with a description of
the services to be performed and the fees to be charged.
 
    
    The audit committee in its sole discretion then approves or disapproves the proposed
services and documents such approval, if given, through written resolutions or in the
minutes of meetings, as the case may be.
  100




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##### Table of Contents



Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 16F. Changes in Registrants Certifying Accountant
       
 Item 16G. Corporate Governance
    101




---



##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
 ExhibitNumber
    
    Document1.1
    
    
    Amended and Restated Memorandum and Articles of Association of the Company (incorporated
herein by reference to Exhibit 3.1 to our registration statement on Form F-1 (Registration
No. 333-121987) filed with the Commission on January 12, 2005).1.2
    
    
    Amendment to Memorandum and Articles of Association dated November 20, 2009.2.1
    
    
    Specimen American Depositary Receipt of us (incorporated by reference to Exhibit 4.1 to our
registration statement on Form F-6 (Registration No. 333-122004) filed with the Commission
on January 13, 2005).2.2
    
    
    Specimen Share Certificate (incorporated herein by reference to Exhibit 4.2 to our
registration statement on Form F-1 (Registration No. 333-121987) filed with the Commission
on January 12, 2005).2.3
    
    
    Deposit Agreement dated February 9, 2005 among us, Citibank N.A. and holders of the
American Depositary Receipts issued thereunder (incorporated by reference to Exhibit 3(a)
to our registration statement on Form F-6 (Registration No. 333-122004) filed with the
Commission on January 13, 2005).4.1
    
    
    Form of Indemnification Agreement (incorporated by reference to Exhibit 10.4 of our
registration statement on Form F-1 (File No. 333-121987) filed with the Commission on
January 12, 2005).4.2
    
    
    Translation of Equity Transfer Agreement by and among Zhang Yi, Shang Aiqin, Wang Jiang, Xu
Hongyan, Xie Peifu, He Ming and Chen Yixiao dated December 30, 2005 (incorporated by
reference to Exhibit 4.13 of our annual report on Form 20-F filed with the Commission on
June 15, 2006).4.3
    
    
    Translation of Equity Transfer and Capital Increase Agreement by and among Beijing Huayi
Brothers Advertising Co., Ltd., Beijing Qixin Weiye Culture Development Co., Ltd. and
Hurray! Digital Music Technology Co., Ltd. dated December 12, 2005 (incorporated by
reference to Exhibit 4.15 of our annual report on Form 20-F filed with the Commission on
June 15, 2006).4.4
    
    
    Translation of Cooperation Agreement by and among Hurray! Solutions, Ltd., Beijing
Enterprise Mobile Technology Co., Ltd., Beijing Hutong Wuxian Technology Co., Ltd., Zhong
Xiongbing, Guangdong Freeland Movie and Television Production Co., Ltd., Beijing Shiji
Freeland Movie and Television Distribution Co., Ltd., Shanghai Hai Le Audio & Video
Distribution Co., Ltd. and Hong Kong Freeland Movie Industry Group Co., Ltd. dated November
14, 2005 (incorporated by reference to Exhibit 4.16 of our annual report on Form 20-F filed
with the Commission on June 15, 2006).4.5
    
    
    Translation of Data Service Cooperation Agreement between Beijing Enlight Times Info Co.,
Ltd and Hurray! Solutions Ltd. (incorporated by reference to Exhibit 10.21 of our
registration statement on Form F-1 (File No. 333-121987) filed with the Commission on
January 12, 2005).4.6
    
    
    Translation of Agreement for Transfer of Entitlement to Dividends between Qindai Wang and
Hurray! Holding Co., Ltd. dated August 15, 2003 (incorporated by reference to Exhibit 10.24
of our registration statement on Form F-1 (File No. 333-121987) filed with the Commission
on January 12, 2005).
  102




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##### Table of Contents



ExhibitNumber
    
    Document4.7
    
    
    Translation of Software Assignment Agreement between Hurray! Solutions Ltd. and Hurray!
Times Communications (Beijing) Ltd. dated May 5, 2004 (incorporated by reference to Exhibit
10.27 of our registration statement on Form F-1 (File No. 333 121987) filed with the
Commission on January 12, 2005).4.8
    
    
    Translation of Software License Agreement between Hurray! Times Communications (Beijing)
Ltd. and Hurray! Solutions Ltd. dated May 5, 2004(incorporated by reference to Exhibit
10.28 of our registration statement on Form F-1 (File No. 333 121987) filed with the
Commission on January 12, 2005).4.9
    
    
    Translation of Letter of Undertaking by Qindai Wang dated May 5, 2004 (incorporated by
reference to Exhibit 10.31 of our registration statement on Form F-1 (File No. 333-121987)
filed with the Commission on January 12, 2005).4.10
    
    
    Translation of Authorization Agreement by Songzuo Xiang dated May 5, 2004 (incorporated by
reference to Exhibit 10.32 of our registration statement on Form F-1 (File No. 333-121987)
filed with the Commission on January 12, 2005).4.11
    
    
    Translation of Exclusive Technical Consulting and Services Agreement between Hurray! Times
Communications (Beijing) Ltd. and Hurray! Solutions Ltd. dated May 5, 2004 (incorporated by
reference to Exhibit 10.33 of our registration statement on Form F-1 (File No. 333-121987)
filed with the Commission on January 12, 2005).4.12
    
    
    Translation of Operating Agreement among Hurray! Times Communications (Beijing) Ltd.,
Hurray! Solutions Ltd., Qindai Wang and Songzuo Xiang dated May 5, 2004 (incorporated by
reference to Exhibit 10.34 of our registration statement on Form F-1 (File No. 333-121987)
filed with the Commission on January 12, 2005).4.13
    
    
    Translation of Contract Related to Exclusive Purchase Right of Equity Interest among
Hurray! Holding Co., Ltd., Hurray! Solutions Ltd. and Qindai Wang dated May 5, 2004
(incorporated by reference to Exhibit 10.35 of our registration statement on Form F-1 (File
No. 333-121987) filed with the Commission on January 12, 2005).4.14
    
    
    Translation of Contract Related to Exclusive Purchase Right of Equity Interest among
Hurray! Holding Co., Ltd., Hurray! Solutions Ltd. and Songzuo Xiang dated May 5, 2004
(incorporated by reference to Exhibit 10.36 of our registration statement on Form F-1 (File
No. 333-121987) filed with the Commission on January 12, 2005).4.15
    
    
    Translation of Equity Interests Pledge Agreement between Qindai Wang and Hurray! Times
Communications (Beijing) Ltd. dated May 5, 2004 (incorporated by reference to Exhibit 10.37
of our registration statement on Form F-1 (File No. 333-121987) filed with the Commission
on January 12, 2005).4.16
    
    
    Translation of Equity Interests Pledge Agreement between Songzuo Xiang and Hurray! Times
Communications (Beijing) Ltd. dated May 5, 2004 (incorporated by reference to Exhibit 10.38
of our registration statement on Form F-1 (File No. 333-121987) filed with the Commission
on January 12, 2005).4.17
    
    
    Translation of Letter of Undertaking by Qindai Wang dated May 5, 2004 (incorporated by
reference to Exhibit 10.39 of our registration statement on Form F-1 (File No. 333-121987)
filed with the Commission on January 12, 2005).4.18
    
    
    Translation of Equity Interests Pledge Agreement between Hurray! Times Communications
(Beijing) Ltd. and Hurray! Solutions Ltd. dated May 5, 2004 (incorporated by reference to
Exhibit 10.46 of our registration statement on Form F-1 (File No. 333-121987) filed with
the Commission on January 12, 2005).4.19
    
    
    Translation of Software License Agreement between Hurray! Times Communications (Beijing)
Ltd. and Beijing WVAS Solutions Ltd. dated May 5, 2004 (incorporated by reference to
Exhibit 10.53 of our registration statement on Form F-1 (File No. 333-121987) filed with
the Commission on January 12, 2005).
  103




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ExhibitNumber
    
    Document4.20
    
    
    Translation of Authorization Agreements by each of Sun Hao and Wang Xiaoping dated October
1, 2004 and October 1, 2004, respectively (incorporated by reference to Exhibit 10.55 of
our registration statement on Form F-1 (File No. 333-121987) filed with the Commission on
January 12, 2005).4.22
    
    
    Translation of Exclusive Technical Consulting and Services Agreement between Hurray! Times
Communications (Beijing) Ltd. and Beijing WVAS Solutions Ltd. dated May 5, 2004
(incorporated by reference to Exhibit 10.57 of our registration statement on Form F-1 (File
No. 333-121987) filed with the Commission on January 12, 2005).4.23
    
    
    Translation of Operating Agreement among Hurray! Times Communications (Beijing) Ltd.,
Beijing WVAS Solutions Ltd., Beijing Enterprise Network Technology Co., Ltd., Sun Hao and
Wang Xiaoping dated October 1, 2004 (incorporated by reference to Exhibit 10.58 of our
registration statement on Form F-1 (File No. 333-121987) filed with the Commission on
January 12, 2005).4.24
    
    
    Translation of Contracts Relating to Exclusive Purchase Right of Equity Interest between
Hurray! Holding Co., Ltd., Beijing WVAS Solutions Ltd. and each of Sun Hao and Wang
Xiaoping dated October 1, 2004 and October 1, 2004, respectively (incorporated by reference
to Exhibit 10.59 of our registration statement on Form F-1 (File No. 333-121987) filed with
the Commission on January 12, 2005).4.25
    
    
    Translation of Contract Relating to Exclusive Purchase Right of Equity Interest between
Hurray! Holding Co., Ltd., Beijing WVAS Solutions Ltd. and Beijing Enterprise Network
Technology Co., Ltd. dated October 1, 2004 (incorporated by reference to Exhibit 10.60 of
our registration statement on Form F-1 (File No. 333-121987) filed with the Commission on
January 12, 2005).4.26
    
    
    Translation of Equity Interests Pledge Agreements between Hurray! Times Communications
(Beijing) Ltd. and each of Sun Hao and Wang Xiaoping dated October 1, 2004 and October 1,
2004, respectively (incorporated by reference to Exhibit 10.61 of our registration
statement on Form F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).4.27
    
    
    Translation of Equity Interests Pledge Agreement between Hurray! Times Communications
(Beijing) Ltd. and Beijing Enterprise Network Technology Co., Ltd. dated October 1, 2004
(incorporated by reference to Exhibit 10.62 of our registration statement on Form F-1 (File
No. 333-121987) filed with the Commission on January 12, 2005).4.28
    
    
    Translation of Software Assignment Agreement between Hurray! Times Communications (Beijing)
Ltd. and Beijing Palmsky Technology Co., Ltd. dated May 5, 2004 (incorporated by reference
to Exhibit 10.65 of our registration statement on Form F-1 (File No. 333-121987) filed with
the Commission on January 12, 2005).4.29
    
    
    Translation of Software License Agreement between Hurray! times Communications (Beijing)
Ltd. and Beijing Palmsky Technology Col, Ltd. dated May 5, 2004 (incorporated by reference
to Exhibit 10.66 of our registration statement on Form F-1 (File No. 333-121987) filed with
the Commission on January 12, 2005).4.30
    
    
    Translation of Authorization Agreement by Yang Haoyu dated October 1, 2004 (incorporated by
reference to Exhibit 10.69 of our registration statement on Form F-1 (File No. 333-121987)
filed with the Commission on January 12, 2005).4.31
    
    
    Translation of Exclusive Technical Consulting and Services Agreement between Hurray! Times
Communications (Beijing) Ltd. and Beijing Palmsky Technology Co., Ltd. dated May 5, 2004
(incorporated by reference to Exhibit 10.71 of our registration statement on Form F-1 (File
No. 333-121987) filed with the Commission on January 12, 2005).4.32
    
    
    Translation of Operating Agreement among Hurray! Times Communications (Beijing) Ltd.,
Beijing Palmsky Technology Co., Ltd., Yang Haoyu and Wang Jianhua dated October 1, 2004
(incorporated by reference to Exhibit 10.72 of our registration statement on Form F-1 (File
No. 333-121987) filed with the Commission on January 12, 2005).
  104




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ExhibitNumber
    
    Document4.33
    
    
    Translation of Contract Relating to Exclusive Purchase Right of Equity Interest among
Hurray! Holding Co., Ltd., Yang Haoyu and Beijing Palmsky Technology Co., Ltd. dated
October 1, 2004 (incorporated by reference to Exhibit 10.73 of our registration statement
on Form F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).4.34
    
    
    Translation of Contract Relating to Exclusive Purchase Right of Equity Interest among
Hurray! Holding Co., Ltd., Wang Jianhua and Beijing Palmsky Technology Co., Ltd. dated
October 1, 2004 (incorporated by reference to Exhibit 10.74 of our registration statement
on Form F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).4.35
    
    
    Translation of Equity Interests Pledge Agreement between Hurray! Times Communications
(Beijing) Ltd. and Yang Haoyu dated October 1, 2004 (incorporated by reference to Exhibit
10.75 of our registration statement on Form F-1 (File No. 333-121987) filed with the
Commission on January 12, 2005).4.36
    
    
    Translation of Equity Interests Pledge Agreement between Hurray! Times Communications
(Beijing) Ltd. and Wang Jianhua dated October 1, 2004 (incorporated by reference to Exhibit
10.76 of our registration statement on Form F-1 (File No. 333-121987) filed with the
Commission on January 12, 2005).4.37
    
    
    Translation of Software License Agreement between Hurray! Times Communications (Beijing)
Ltd. and Beijing Enterprise Network Technology Co., Ltd. dated May 5, 2004 (incorporated by
reference to Exhibit 10.79 of our registration statement on Form F-1 (file No. 333-121987)
filed with the Commission on January 12, 2005).4.38
    
    
    Translation of Authorization Agreement by Sun Hao dated August 15, 2004 (incorporated by
reference to Exhibit 10.81 of our registration statement on Form F-1 (File No. 333-121987)
filed with the Commission on January 12, 2005).4.39
    
    
    Translation of Authorization Agreement by Wang Xiaoping dated August 15, 2004 (incorporated
by reference to Exhibit 10.82 of our registration statement on Form F-1 (File No.
333-121987) filed with the Commission on January 12, 2005).4.40
    
    
    Translation of Exclusive Technical Consulting and Services Agreement between Hurray! Times
Communications (Beijing) Ltd. and Beijing Enterprise Network Technology Co., Ltd. dated May
5, 2004 (incorporated by reference to Exhibit 10.83 of our registration statement on Form
F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).4.41
    
    
    Translation of Operating Agreement between Hurray! Times Communications (Beijing) Ltd.,
Beijing Enterprise Network Technology Co., Ltd., Sun Hao and Wang Xiaoping dated August 15,
2004 (incorporated by reference to Exhibit 10.84 of our registration statement on Form F-1
(File No. 333-121987) filed with the Commission on January 12, 2005).4.42
    
    
    Translation of Contract Relating to Exclusive Purchase Right of Equity Interest among
Hurray! Holding Co., Ltd., Wang Xiaoping and Beijing Enterprise Network Technology Co.,
Ltd. dated August 15, 2004 (incorporated by reference to Exhibit 10.85 of our registration
statement on Form F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).4.43
    
    
    Translation of Contract Relating to Exclusive Purchase Right of Equity Interest among
Hurray! Holding Co., Ltd., Sun Hao and Beijing Enterprise Network Technology Co., Ltd.
dated August 15, 2004 (incorporated by reference to Exhibit 10.86 of our registration
statement on Form F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).
  105




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ExhibitNumber
    
    Document4.44
    
    
    Translation of Equity Interests Pledge Agreement between Hurray! Times Communications
(Beijing) Ltd. and Sun Hao dated October 1, 2004 (incorporated by reference to Exhibit
10.87 of our registration statement on Form F-1 (File No. 333-121987) filed with the
Commission on January 12, 2005).4.45
    
    
    Translation of Equity Interests Pledge Agreement between Hurray! Times Communications
(Beijing) Ltd. and Wang Xiaoping dated October 1, 2004 (incorporated by reference to
Exhibit 10.88 of our registration statement on Form F-1 (File No. 333-121987) filed with
the Commission on January 12, 2005).4.46
    
    
    Translation of Agreement on Transfer of Shares of Beijing Enterprise Network Technology
Co., Ltd. between Sun Hao and Wang Xiaoping and Hurray! Solutions Ltd. and Wang Qindai
dated July 19, 2004 (incorporated by reference to Exhibit 10.89 of our registration
statement on Form F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).4.47
    
    
    Translation of Software License Agreement by and between Hurray! Times Communications
(Beijing) Ltd. and Shanghai Magma Digital Technology Co. Ltd. dated January 12, 2006
(incorporated by reference to Exhibit 4.97 of our annual report on Form 20-F (File No.
000-51116) filed with the Commission on June 15, 2006).4.48
    
    
    Translation of Software Assignment Agreement by and between Shanghai Magma Digital
Technology Co. Ltd. and Hurray! Times Communications (Beijing) Ltd. dated January 12, 2006
(incorporated by reference to Exhibit 4.98 of our annual report on Form 20-F (File No.
000-51116) filed with the Commission on June 15, 2006).4.49
    
    
    Translation of Authorization Agreement by Shang Aiqin dated January 12, 2006 (incorporated
by reference to Exhibit 4.101 of our annual report on Form 20-F (File No. 000 51116) filed
with the Commission on June 15, 2006).4.50
    
    
    Translation of Authorization Agreement by Zhang Yi dated January 12, 2006 (incorporated by
reference to Exhibit 4.102 of our annual report on Form 20-F (File No. 000 51116) filed
with the Commission on June 15, 2006).4.51
    
    
    Translation of Exclusive Technical Consulting and Services Agreement by and between Hurray!
Times Communications (Beijing) Ltd. and Shanghai Magma Digital Technology Co. Ltd. dated
January 12, 2006 (incorporated by reference to Exhibit 4.103 of our annual report on Form
20-F (File No. 000 51116) filed with the Commission on June 15, 2006).4.52
    
    
    Translation of Operating Agreement by and among Hurray! Times Communications (Beijing)
Ltd., Shanghai Magma Digital Technology Co. Ltd., Zhang Yi and Shang Aiqin dated January
12, 2006 (incorporated by reference to Exhibit 4.104 of our annual report on Form 20-F
(File No. 000 51116) filed with the Commission on June 15, 2006).4.53
    
    
    Translation of Contract Relating to the Exclusive Purchase Right of an Equity Interest by
and among Hurray! Holding Co., Ltd., Shang Aiqin and Shanghai Magma Digital Technology Co.
Ltd. dated January 12, 2006 (incorporated by reference to Exhibit 4.105 of our annual
report on Form 20-F (File No. 000 51116) filed with the Commission on June 15, 2006).4.54
    
    
    Translation of Contract Relating to the Exclusive Purchase Right of an Equity Interest by
and among Hurray! Holding Co., Ltd., Zhang Yi and Shanghai Magma Digital Technology Co.
Ltd. dated January 12, 2006 (incorporated by reference to Exhibit 4.106 of our annual
report on Form 20-F (File No. 000 51116) filed with the Commission on June 15, 2006).4.55
    
    
    Translation of Equity Interests Pledge Agreement by and between Hurray! Times
Communications (Beijing) Ltd. and Zhang Yi dated January 12, 2006 (incorporated by
reference to Exhibit 4.107 of our annual report on Form 20-F (File No. 000 51116) filed
with the Commission on June 15, 2006).
  106




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ExhibitNumber
    
    Document4.56
    
    
    Translation of Equity Interests Pledge Agreement by and between Hurray! Times
Communications (Beijing) Ltd. and Shang Aiqin dated January 12, 2006 (incorporated by
reference to Exhibit 4.108 of our annual report on Form 20-F (File No. 000 51116) filed
with the Commission on June 15, 2006).4.57
    
    
    2004 Share Incentive Plan (incorporated by reference to Exhibit 10.95 of our registration
statement on Form F-1 (File No. 333-121987) filed with the Commission on January 12, 2005).4.58
    
    
    Translation of Supplemental Agreement to Agreement on Transfer of Shares of Beijing
Enterprise Network Technology Co., Ltd. among Hurray! Holding Co., Ltd., Qindai Wang, Yu
Qin and Zhang Chen dated November 4, 2004 (incorporated by reference to Exhibit 10.96 of
our registration statement on Form F-1 (File No. 333-121987) filed with the Commission on
January 12, 2005).4.59
    
    
    Translation of Supplemental Agreement to Agreement on Transfer of Shares of Beijing
Enterprise Mobile Technology Co., Ltd. among Hurray! Holdings Co., Ltd., Funway Investment
Holdings Ltd. and I-mode Technology Ltd. dated November 4, 2004 (incorporated by reference
to Exhibit 10.97 of our registration statement on Form F-1 (File No. 333-121987) filed with
the Commission on January 12, 2005).4.60
    
    
    Translation of Loan Agreement between Beijing Enterprise Network Technology Co., Ltd. and
Yu Qin dated November 4, 2004 (incorporated by reference to Exhibit 10.98 of our
registration statement on Form F-1 (File No. 333-121987) filed with the Commission on
January 12, 2005).4.61
    
    
    Translation of Loan Agreement between WVAS Solutions Ltd. and Yu Qin dated November 4, 2004
(incorporated by reference to Exhibit 10.99 of our registration statement on Form F-1 (File
No. 333-121987) filed with the Commission on January 12, 2005).4.62
    
    
    Translation of Supplemental Agreement dated January 25, 2005 to certain Equity Interests
Pledge Agreements (incorporated by reference to the registration statement on Form F-1
(File No. 333-121987) filed with the Commission on January 28, 2005).4.63
    
    
    Translation of Cooperation Agreement between Hurray! Digital Media Technology Co., Ltd.,
Lan Gang, Chen Jianzhong, Hu Li, and Guangzhou Hurray! Secular Bird Culture Communication
Co., Ltd, dated March 12, 2007 (incorporated by reference to Exhibit 4.120 of our annual
report on Form 20-F (File No. 000-51116) filed with the Commission on June 15, 2007).4.64
    
    
    Translation of Supplemental Agreement between Hurray Holdings Co., Ltd. and Magma Digital
International Limited, dated September 1, 2006 (incorporated by reference to Exhibit 4.121
of our annual report on Form 20-F (File No. 000-51116) filed with the Commission on June
15, 2007).4.65
    
    
    Translation of Supplemental Agreement between Hurray Solutions, Ltd., Beijing Enterprise
Mobile Technology Co., Ltd., Beijing Hutong Wuxian Technology Co., Ltd., Zhong Xiongbing,
Guangdong Freeland Movie and Television Production Co., Ltd., Beijing Shiji Freeland Movie
and Television Distribution Co., Ltd., Shanghai Hai Le Audio and Video Distribution Co.,
Ltd., Hong Kong Freeland Movie Industry Group Co., Ltd. and Beijing Freeland Wu Xian
Digital Music Technology Co., Ltd., dated July 30, 2006 (incorporated by reference to
Exhibit 4.122 of our annual report on Form 20-F (File No. 000-51116) filed with the
Commission on June 15, 2007).4.66
    
    
    Translation of Supplemental Agreement between Hurray Solutions, Ltd., Beijing Enterprise
Mobile Technology Co., Ltd., Beijing Hutong Wuxian Technology Co., Ltd., Zhong Xiongbing,
Guangdong Freeland Movie and Television Production Co., Ltd., Beijing Shiji Freeland Movie
and Television Distribution Co., Ltd., Shanghai Hai Le Audio and Video Distribution Co.,
Ltd. and Hong Kong Freeland Movie Industry Group Co., Ltd, dated November 30, 2006
(incorporated by reference to Exhibit 4.123 of our annual report on Form 20-F (File No.
000-51116) filed with the Commission on June 15, 2007).4.67
    
    
    Translation of Share Transfer Agreement between TWM Holding, Hurray! Holding Co., Ltd., and
Hurray! Times Communications (Beijing) Ltd. dated October 8, 2007 (incorporated by
reference to Exhibit 4.84 of our annual report on Form 20-F (File No. 000-51116) filed with
the Commission on June 19, 2008).
  107




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ExhibitNumber
    
    Document4.68
    
    
    Translation of Equity Transfer Agreement of Shanghai Saiyu Information Technology Co., Ltd.
among Liang Ruan, Yuqi Shi, Jie Li and Jianmei Wan, dated February 12, 2007 (incorporated
by reference to Exhibit 4.85 of our annual report on Form 20-F (File No. 000-51116) filed
with the Commission on June 19, 2008).4.69
    
    
    Translation of Transfer Agreement between Hurray! Times Communications (Beijing) Co., Ltd.,
Beijing WVAS Solutions Ltd., Beijing Enterprise Network Technology Co., Ltd., Xiaoping
Wang, Hao Sun and Beijing Hurray! Times Technology Co., Ltd., dated May, 2007 (incorporated
by reference to Exhibit 4.86 of our annual report on Form 20-F (File No. 000-51116) filed
with the Commission on June 19, 2008).4.70
    
    
    Translation of Cooperation Agreement on Monternet WAP Services between China Mobile
Communications Group Corporation and Beijing Enterprise Network Technology Co., Ltd. dated
June 18, 2008. (incorporated by reference to Exhibit 4.70 of our
annual report on Form 20-F (File No. 000-5116) filed with the
Commission on June 26, 2009).4.71
    
    
    Translation of Mobile Value-added Service (WAP1.2) Cooperation Agreement between China
Telecommunications Corporation and Beijing Hengji Weiye Electronic Commerce Co., Ltd. dated
October 1, 2008 (incorporated by reference to Exhibit 4.71 of our annual report on Form
20-F (File No. 000-51116) filed with the Commission on June 26, 2009).4.72
    
    
    Investment and Shareholders Agreement between, among others, Seed Music Group Limited and
Hurray! Music Holding Co., Ltd. dated September 24, 2008 (incorporated by reference to
Exhibit 4.72 of our annual report on Form 20-F (File No. 000-51116) filed with the
Commission on June 26, 2009).4.73
    
    
    Translation of Supplemental Agreement of Asset, Business and Personnel Transfer Agreement
between Beijing Secular Bird Culture and Art Development Centre and Guangzhou Secular Bird
Culture Communication Co., Ltd. dated August 2008 (incorporated by reference to Exhibit
4.73 of our annual report on Form 20-F (File No. 000-51116) filed with the Commission on
June 26, 2009).4.74
    
    
    Translation of Supplemental Agreement between Hurray! Digital Media Technology Co., Ltd.
and Beijing Secular Bird Culture and Art Development Centre dated August 2008 (incorporated
by reference to Exhibit 4.74 of our annual report on Form 20-F (File No. 000-51116) filed
with the Commission on June 26, 2009).4.75
    
    
    Translation of Supplemental Agreement among Seed Music Group Limited, Hurray! Media Holding
Co., Ltd., Tien, Ting-Feng, and Huang, Tien-Zan dated 2009 (incorporated by reference to
Exhibit 4.75 of our annual report on Form 20-F (File No. 000-51116) filed with the
Commission on June 26, 2009).4.76
    
    
    Translation of Supplemental Agreement among Hurray! Media Technologies Co., Ltd., Xiongbing
Zhong, Guangdong Freeland Movie and Television Production Co., Ltd., Beijing Shiji Freeland
Movie and Television Distribution Co., Ltd., Shanghai Hai Le Audio and Video Distribution
Co., Ltd., and Hongkong Freeland Movie Industry Group Co., Ltd. dated 2008 (incorporated by
reference to Exhibit 4.76 of our annual report on Form 20-F (File No. 000-51116) filed with
the Commission on June 26, 2009).8.1
    
    
    List of Significant Subsidiaries and Affiliates.
  108




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##### Table of Contents



ExhibitNumber
    
    Document11.1
    
    
    Code of Business Conduct (incorporated by reference to Exhibit 11.1 of our annual report on
Form 20-F filed with the Commission on June 15, 2006).12.1
    
    
    Certification of Chief Executive Officer Required by Rule 13a-14(a).12.2
    
    
    Certification of Chief Financial Officer Required by Rule 13a-14(a).13.1
    
    
    Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code.13.2
    
    
    Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code.15.1
    
    
    Consent of Deloitte Touche Tohmatsu CPA Ltd., Independent Registered Public Accounting Firm.15.2
    
    
    Consent of Appleby.15.3
    
    
    Letter of Deloitte Touche Tohmatsu CPA Ltd. dated April 29, 2010.15.4
    
    
    Consent
of PricewaterhouseCoopers Zhong Tian CPAs Limited Company.
  109




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##### Table of Contents



SIGNATURES
  HURRAY! HOLDING CO., LTD.By:
    /s/ Haibin QuHaibin QuActing Chief Executive OfficerDate: April 29, 2010  110




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
HURRAY! HOLDING CO., LTD.
 PageReport
of Independent Registered Public Accounting Firm for the year ended
December 31, 2009
    
    
    F-2Report
of Independent Registered Public Accounting Firm for the years ended
December 31, 2008 and 2007
    
    
    F-3Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-4Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Changes in Equity for the years ended December 31, 2009, 2008 and 2007
    
    
    F-7Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007
    
    
    F-8Notes to the Consolidated Financial Statements
    
    
    F-9Additional Information  Financial Statement Schedule 1
    
    
    F-43
  F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF  HURRAY! HOLDING CO., LTD.:
      
  F-2




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 
   
   
  
  F-3




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##### Table of Contents



HURRAY! HOLDING CO., LTD.
 
 CONSOLIDATED BALANCE SHEETS
 December 31, 2008
    
    
    December 31, 2009(in U.S. dollars, except number of shares)AssetsCurrent assets:Cash and cash equivalents
    
    
    59,472,703
    
    
    
    48,489,095Short term investments
    
    
    
    
    
    
    10,000,000Accounts receivable, net of allowance
    
    
    12,658,287
    
    
    
    3,192,366Prepaid expenses and other current assets
    
    
    4,170,323
    
    
    
    1,834,361Amount due from related parties
    
    
    745,351
    
    
    
    62,725Inventories
    
    
    254,589
    
    
    
    196,745Current deferred tax assets
    
    
    363,330
    
    
    
    Receivable on disposal of a subsidiary
    
    
    46,860
    
    
    
    Total current assets
    
    
    77,711,443
    
    
    
    63,775,292Property and equipment, net
    
    
    980,060
    
    
    
    879,775Acquired intangible assets, net
    
    
    1,945,322
    
    
    
    1,081,962Investment in an affiliated company
    
    
    824,579
    
    
    
    Goodwill
    
    
    3,156,664
    
    
    
    2,099,290Deposits and other non-current assets
    
    
    719,977
    
    
    
    331,958Prepaid acquisition costs
    
    
    1,907,400
    
    
    
    Investment at cost
    
    
    600,038
    
    
    
    Non-current deferred tax assets
    
    
    478,919
    
    
    
    Total assets
    
    
    88,324,402
    
    
    
    68,168,277Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    
    2,454,064
    
    
    
    3,731,562Notes payable
    
    
    
    
    
    
    227,720Acquisitions payable
    
    
    14,657
    
    
    
    Accrued expenses and other current liabilities
    
    
    3,018,203
    
    
    
    6,260,849Amount due to related parties
    
    
    207,879
    
    
    
    439,445Income tax payable
    
    
    123,626
    
    
    
    654,835Current deferred tax liabilities
    
    
    497,283
    
    
    
    12,316Total current liabilities
    
    
    6,315,712
    
    
    
    11,326,727Long-term payable
    
    
    24,002
    
    
    
    17,554Non-current deferred tax liabilities
    
    
    292,194
    
    
    
    262,665Total liabilities
    
    
    6,631,908
    
    
    
    11,606,946Commitments and contingencies
    
    
    
    
    
    
    Redeemable non-controlling interest
    
    
    
    
    
    
    370,870Equity:Ordinary shares ($0.00005 par value; 4,560,000,000
shares authorized; 2,193,343,740 and 2,200,194,040
shares issued and outstanding as of December 31,
2008 and December 31, 2009, respectively)
    
    
    109,617
    
    
    
    109,959Additional paid-in capital
    
    
    75,012,693
    
    
    
    75,190,411Statutory reserves
    
    
    1,791,324
    
    
    
    1,791,324Accumulated deficits
    
    
    (9,991,663
    )
    
    
    (32,649,555
    )Accumulated other comprehensive income
    
    
    9,987,314
    
    
    
    9,953,826Total Hurray! Holding Co., Ltd. shareholders equity
    
    
    76,909,285
    
    
    
    54,395,965Non-controlling interests
    
    
    4,783,209
    
    
    
    1,794,496Total equity
    
    
    81,692,494
    
    
    
    56,190,461Total liabilities and equity
    
    
    88,324,402
    
    
    
    68,168,277
   F-4




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##### Table of Contents



HURRAY! HOLDING CO., LTD.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    
    December 31, 2008
    
    

December 31, 2009(in U.S. dollars, except number of shares)Net revenues:Wireless value-added services
    
    
    50,038,014
    
    
    
    42,671,588
    
    
    
    20,169,110Recorded music
    
    
    10,488,613
    
    
    
    11,286,812
    
    
    
    14,473,185Total net revenues
    
    
    60,526,627
    
    
    
    53,958,400
    
    
    
    34,642,295Cost of revenues:Wireless value-added services
    
    
    (36,394,300
    )
    
    
    (32,839,642
    )
    
    
    (15,331,675
    )Recorded music
    
    
    (6,232,728
    )
    
    
    (6,729,725
    )
    
    
    (12,625,139
    )Total cost of revenues
    
    
    (42,627,028
    )
    
    
    (39,569,367
    )
    
    
    (27,956,814
    )Gross profit
    
    
    17,899,599
    
    
    
    14,389,033
    
    
    
    6,685,481Operating expenses:Product development
    
    
    (2,028,265
    )
    
    
    (991,689
    )
    
    
    (466,543
    )Selling and marketing
    
    
    (11,513,850
    )
    
    
    (9,132,374
    )
    
    
    (6,329,856
    )General and administrative
    
    
    (9,141,381
    )
    
    
    (11,983,973
    )
    
    
    (22,992,865
    )Goodwill impairment
    
    
    (38,778,584
    )
    
    
    (2,675,211
    )
    
    
    (3,592,933
    )Gain on reduction of Unicom liability
    
    
    
    
    
    
    1,557,153
    
    
    
    Gain from reversed litigation expenses
    
    
    
    
    
    
    557,167
    
    
    
    Total operating expenses
    
    
    (61,462,080
    )
    
    
    (22,668,927
    )
    
    
    (33,382,197
    )Loss from continuing operations
    
    
    (43,562,481
    )
    
    
    (8,279,894
    )
    
    
    (26,696,716
    )Interest income
    
    
    2,313,576
    
    
    
    1,613,078
    
    
    
    454,438Interest expense
    
    
    (179,062
    )
    
    
    
    
    
    
    (13,681
    )Other income, net
    
    
    465,825
    
    
    
    247,156
    
    
    
    341,651Gain on reduction of acquisition payable
    
    
    
    
    
    
    5,000,000
    
    
    
    Foreign exchange loss
    
    
    
    
    
    
    (8,990,067
    )
    
    
    Loss before income tax credit (expense), equity in (loss) earning of affiliated company, impairment for
investment in affiliated company and discontinued operations
    
    
    (40,962,142
    )
    
    
    (10,409,727
    )
    
    
    (25,914,308
    )Income tax benefit (expense)
    
    
    182,370
    
    
    
    (486,250
    )
    
    
    (234,286
    )Equity in (loss) earning of affiliated company
    
    
    (62,756
    )
    
    
    64,293
    
    
    
    (914,072
    )Impairment for investment in affiliated company
    
    
    
    
    
    
    (1,870,897
    )
    
    
    Net loss from continuing operations
    
    
    (40,842,528
    )
    
    
    (12,702,581
    )
    
    
    (27,062,666
    )Discontinued operations:Net loss from discontinued operations, net of tax
    
    
    (612,170
    )
    
    
    
    
    
    
    Gain from disposal of discontinued operations
    
    
    192,943
    
    
    
    412,530
    
    
    
    221,899Net (loss) income from discontinued operations, net of tax
    
    
    (419,227
    )
    
    
    412,530
    
    
    
    221,899Net loss
    
    
    (41,261,755
    )
    
    
    (12,290,051
    )
    
    
    (26,840,767
    )Less: Net (income) loss attributable to the non-controlling interests and redeemable non-controlling interest
    
    
    (688,440
    )
    
    
    337,455
    
    
    
    4,182,875Net loss attributable to Hurray! Holding Co., Ltd.
    
    
    (41,950,195
    )
    
    
    (11,952,596
    )
    
    
    (22,657,892
    )Net loss
    
    
    (41,261,755
    )
    
    
    (12,290,051
    )
    
    
    (26,840,767
    )Other comprehensive income:Currency translation adjustments of subsidiaries
    
    
    4,642,922
    
    
    
    2,658,344
    
    
    
    (37,917
    )Comprehensive loss
    
    
    (36,618,833
    )
    
    
    (9,631,707
    )
    
    
    (26,878,684
    )Comprehensive (income)/loss attributable to non-controlling interest and redeemable non-controlling interest
    
    
    (1,077,837
    )
    
    
    11,551
    
    
    
    4,187,304Comprehensive loss attributable to Hurray! Holding Co., Ltd.
    
    
    (37,696,670
    )
    
    
    (9,620,156
    )
    
    
    (22,691,380
    )
  F-5




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##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    
    December 31, 2008
    
    

December
31, 2009(in U.S. dollars, except number of shares)Loss per ADS-basic and diluted (1ADS = 100 shares):Loss from continuing operations attributable to Hurray! Holding Co., Ltd. common shareholders
    
    
    (1.91
    )
    
    
    (0.57
    )
    
    
    (1.04
    )Discontinued operations attributable to Hurray! Holding Co., Ltd. common shareholders
    
    
    (0.02
    )
    
    
    0.02
    
    
    
    0.01Net loss attributable to Hurray! Holding Co., Ltd. common shareholders
    
    
    (1.93
    )
    
    
    (0.55
    )
    
    
    (1.03
    )Weighted average ADS used in per ADS calculationBasic
    
    
    21,722,082
    
    
    
    21,856,151
    
    
    
    21,962,919Diluted
    
    
    21,722,082
    
    
    
    21,856,151
    
    
    
    21,962,919Amounts attributable to Hurray! Holding common shareholders:Loss from continuing operations, net of tax
    
    
    (41,530,968
    )
    
    
    (12,365,126
    )
    
    
    (22,879,791
    )Discontinued operations, net of tax
    
    
    (419,227
    )
    
    
    412,530
    
    
    
    221,899Net loss
    
    
    (41,950,195
    )
    
    
    (11,952,596
    )
    
    
    (22,657,892
    )Share-based compensation included in:Product development
    
    
    921
    
    
    
    40,102
    
    
    
    Selling and marketing
    
    
    286,885
    
    
    
    621,094
    
    
    
    118,521General and administrative
    
    
    155,169
    
    
    
    284,086
    
    
    
    50,789
   F-6




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##### Table of Contents



HURRAY! HOLDING CO., LTD.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 Retained
    
    
    Accumulated
    
    
    Total Hurray!Ordinary shares
    
    
    Additional
    
    
    
    
    
    
    earnings



    
    
    other
    
    
    Holding Co., Ltd.(US$0.00005 par value)
    
    
    paid-in
    
    
    Statutory
    
    
    (Accumulated
    
    
    comprehensive

    
    
    shareholders
    

    
    Non-controlling
    
    
    TotalShares
    
    
    Amount
    
    
    capital
    
    
    reserves
    
    
    deficits)
    
    
    income
    
    
    equity
    
    
    interests
    
    
    equity(in U.S. dollars, except shares data)Balance as of January 1, 2007
    
    
    2,163,031,740
    
    
    
    108,102
    
    
    
    73,608,117
    
    
    
    5,661,061
    
    
    
    40,041,391
    
    
    
    3,401,349
    
    
    
    122,820,020
    
    
    
    3,359,193
    
    
    
    126,179,213Non-controlling interest arising from acquisition of Secular Bird and
Beijing Hurray! Fly Songs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    230,372
    
    
    
    230,372Stock-based compensation expense
    
    
    11,099,300
    
    
    
    554
    
    
    
    442,421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442,975
    
    
    
    
    
    
    
    442,975Exercise of stock options
    
    
    653,400
    
    
    
    33
    
    
    
    16,301
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,334
    
    
    
    
    
    
    
    16,334Appropriations to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    841,788
    
    
    
    (841,788
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative currency translation adjustments of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,253,525
    
    
    
    4,253,525
    
    
    
    389,397
    
    
    
    4,642,922Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,950,195
    )
    
    
    
    
    
    
    (41,950,195
    )
    
    
    688,440
    
    
    
    (41,261,755
    )Balance as of December 31, 2007
    
    
    2,174,784,440
    
    
    
    108,689
    
    
    
    74,066,839
    
    
    
    6,502,849
    
    
    
    (2,750,592
    )
    
    
    7,654,874
    
    
    
    85,582,659
    
    
    
    4,667,402
    
    
    
    90,250,061Stock-based compensation expense
    
    
    18,499,300
    
    
    
    925
    
    
    
    944,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    945,282
    
    
    
    
    
    
    
    945,282Exercise of stock options
    
    
    60,000
    
    
    
    3
    
    
    
    1,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    
    
    
    
    1,500Appropriations to statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,711,525
    )
    
    
    4,711,525
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital injection to Secular Bird attributable to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,358
    
    
    
    127,358Cumulative currency translation adjustments of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,332,440
    
    
    
    2,332,440
    
    
    
    325,904
    
    
    
    2,658,344Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,952,596
    )
    
    
    
    
    
    
    (11,952,596
    )
    
    
    (337,455
    )
    
    
    (12,290,051
    )Balance as of December 31, 2008
    
    
    2,193,343,740
    
    
    
    109,617
    
    
    
    75,012,693
    
    
    
    1,791,324
    
    
    
    (9,991,663
    )
    
    
    9,987,314
    
    
    
    76,909,285
    
    
    
    4,783,209
    
    
    
    81,692,494Stock-based compensation expense
    
    
    6,500,300
    
    
    
    324
    
    
    
    168,986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,310
    
    
    
    
    
    
    
    169,310Exercise of stock options
    
    
    350,000
    
    
    
    18
    
    
    
    8,732
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,750
    
    
    
    
    
    
    
    8,750Cumulative currency translation adjustments of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,488
    )
    
    
    (33,488
    )
    
    
    (4,429
    )
    
    
    (37,917
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,657,892
    )
    
    
    
    
    
    
    (22,657,892
    )
    
    
    (2,984,284
    )
    
    
    (25,642,176
    )Balance as of December 31, 2009
    
    
    2,200,194,040
    
    
    $
    109,959
    
    
    
    75,190,411
    
    
    
    1,791,324
    
    
    
    (32,649,555
    )
    
    
    9,953,826
    
    
    
    54,395,965
    
    
    
    1,794,496
    
    
    
    56,190,461
   F-7




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##### Table of Contents



HURRAY! HOLDING CO., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009(in U.S. dollars)Operating activities:Net loss
    
    
    (41,261,755
    )
    
    
    (12,290,051
    )
    
    
    (26,840,767
    )Adjustments for:Share-based compensation
    
    
    442,975
    
    
    
    945,282
    
    
    
    169,310Depreciation and amortization
    
    
    3,644,095
    
    
    
    3,327,798
    
    
    
    1,699,171Impairment of goodwill
    
    
    38,778,584
    
    
    
    2,675,211
    
    
    
    3,592,933Impairment for investment in affiliated company
    
    
    
    
    
    
    1,870,897
    
    
    
    Impairment of intangible assets
    
    
    2,480,253
    
    
    
    2,850,714
    
    
    
    3,542,071Bad debt provision
    
    
    453,674
    
    
    
    1,012,738
    
    
    
    3,422,876Inventory provision
    
    
    
    
    
    
    
    
    
    
    238,370Exchange loss
    
    
    
    
    
    
    
    
    
    
    17,198Equity in (earning) loss of affiliated company
    
    
    62,756
    
    
    
    (64,293
    )
    
    
    914,072Gain from disposal of subsidiary
    
    
    (192,943
    )
    
    
    (412,530
    )
    
    
    (221,899
    )Receivable from disposal of subsidiary (net of cash disposed of $771,570)
    
    
    (3,186,887
    )
    
    
    
    
    
    
    Loss (gain) on disposal of property and equipment
    
    
    74,300
    
    
    
    112,745
    
    
    
    (5,843
    )Change in fair value of contingent consideration
    
    
    
    
    
    
    
    
    
    
    (352,217
    )Gain on reduction of acquisition payable
    
    
    
    
    
    
    (5,000,000
    )
    
    
    Gain on reduction of Unicom liability
    
    
    
    
    
    
    (1,557,153
    )
    
    
    Gain from reversed litigation expenses
    
    
    
    
    
    
    (557,167
    )
    
    
    Changes in assets and liabilities net of effect of businesses acquired and sold:Accounts receivable
    
    
    (2,069,378
    )
    
    
    3,492,068
    
    
    
    6,439,522Prepaid expenses and other current assets
    
    
    (138,548
    )
    
    
    (1,142,954
    )
    
    
    2,727,610Amount due from related parties
    
    
    (273,618
    )
    
    
    (245,724
    )
    
    
    733,151Deposits and other non-current assets
    
    
    (147,543
    )
    
    
    183,003
    
    
    
    439,859Inventories
    
    
    (81,422
    )
    
    
    56,833
    
    
    
    (128,122
    )Deferred taxes
    
    
    (749,936
    )
    
    
    187,671
    
    
    
    (516,469
    )Accounts payable
    
    
    (140,809
    )
    
    
    (761,068
    )
    
    
    187,315Notes payable
    
    
    
    
    
    
    
    
    
    
    22,901Accrued expenses and other current liabilities
    
    
    305,097
    
    
    
    (71,705
    )
    
    
    2,253,594Amount due to related parties
    
    
    245,379
    
    
    
    (63,140
    )
    
    
    (80,199
    )Income tax payable
    
    
    (299,897
    )
    
    
    (102,057
    )
    
    
    290,670Net cash used in operating activities
    
    
    (2,055,623
    )
    
    
    (5,552,882
    )
    
    
    (1,454,893
    )Investing activities:Increase of short-term investments
    
    
    
    
    
    
    
    
    
    
    (10,000,000
    )Purchases of property and equipment
    
    
    (863,603
    )
    
    
    (349,233
    )
    
    
    (678,282
    )Proceeds from disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    80,498Purchase of intangible assets
    
    
    (1,535,436
    )
    
    
    (1,718,340
    )
    
    
    (66,259
    )Proceeds from disposal of a subsidiary
    
    
    
    
    
    
    4,517,070
    
    
    
    254,102Acquisition of subsidiaries, net of cash acquired ($1,398,709, nil, and
$1,034,308 for the years ended December 31, 2007, 2008 and 2009, respectively)
    
    
    (3,237,834
    )
    
    
    (2,207,132
    )
    
    
    1,034,308Payments related to acquisition not yet consummated
    
    
    
    
    
    
    (1,907,400
    )
    
    
    Investment at cost in Seed Music Group Limited
    
    
    
    
    
    
    (600,038
    )
    
    
    Investment in an affiliated company
    
    
    (2,483,277
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (8,120,150
    )
    
    
    (2,265,073
    )
    
    
    (9,375,633
    )Financing activities:Proceeds from exercise of options
    
    
    16,334
    
    
    
    1,500
    
    
    
    2,500Net cash provided by financing activities
    
    
    16,334
    
    
    
    1,500
    
    
    
    2,500Effect of exchange rate changes on cash and cash equivalents
    
    
    1,541,345
    
    
    
    1,310,274
    
    
    
    (155,582
    )Net decrease in cash and cash equivalents
    
    
    (10,159,439
    )
    
    
    (7,816,455
    )
    
    
    (10,828,026
    )Cash and cash equivalents, beginning of year
    
    
    74,596,978
    
    
    
    65,978,884
    
    
    
    59,472,703Cash and cash equivalents, end of the year
    
    
    65,978,884
    
    
    
    59,472,703
    
    
    
    48,489,095Supplemental disclosure of cash flow information:Income taxes paid
    
    
    854,864
    
    
    
    385,501
    
    
    
    465,696
   F-8




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##### Table of Contents



HURRAY! HOLDING CO., LTD.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 and 2009  (Amounts expressed in U.S. dollars, unless otherwise stated)
 1. ORGANIZATION AND PRINCIPAL ACTIVITIES
   Date of
    
    Percentage ofincorporation or
    
    effective ownershipName of Subsidiaries
    
    establishment
    
    by Hurray!Wireless value-added services (WVAS) business segment:SubsidiariesBeijing Hurray! Times Technology Co., Ltd. (Beijing Hurray Times)
    
    June 27, 2002
    
    
    100
    %Hurray Technologies (Hong Kong) Ltd.(incorporated in Hong Kong)
    
    July 23, 2003
    
    
    99
    %Invest China Group Limited (incorporated in the British Virgin Islands)
    
    April 1, 2007
    
    
    100
    %Beijing Hand-in-Hand Media Technology Co., Ltd.
    
    April 1, 2007
    
    
    100
    %Shanghai Fuming Information Technology Co., Ltd.
    
    January 1, 2006
    
    
    100
    %Variable Interest EntitiesHurray! Solutions Ltd.
    
    September 21, 1999
    
    
    100
    %Beijing Enterprise Network Technology Co., Ltd. (Beijing Enterprise)
    
    March, 31, 2004
    
    
    100
    %Beijing Hengji Weiye Electronic Commerce Co., Ltd. (Hengji Weiye)
    
    October 1, 2005
    
    
    100
    %Beijing Hutong Wuxian Technology Co., Ltd. (Beijing Hutong)
    
    April 1, 2005
    
    
    100
    %Beijing Palmsky Technology Co., Ltd. (Beijing Palmsky)
    
    March, 31, 2004
    
    
    100
    %Henan Yinshan Digital Network Technology Co., Ltd. (Henan Yinshan)
    
    June 30, 2007
    
    
    100
    %Shanghai Magma Digital Technology Co., Ltd. (Shanghai Magma)
    
    January 1, 2006
    
    
    100
    %Shanghai Saiyu Information Technology Co., Ltd. (Saiyu)
    
    April 1, 2007
    
    
    100
    %Subsidiaries of Variable Interest EntitiesBeijing WVAS Solutions Ltd.
    
    October 10, 2001
    
    
    100
    %
  F-9




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##### Table of Contents



Date of
    
    Percentage ofincorporation or
    
    effective ownershipName of Subsidiaries
    
    establishment
    
    by Hurray!Recorded music business segment:SubsidiariesHurray! Media Co., Ltd. (incorporated in the Cayman Islands)
    
    August 19, 2005
    
    
    100
    %Seed Music Group Limited (Seed Music)
    
    July 26, 2006
    
    
    61.08
    %Seed Music Co., Ltd
    
    June 28, 1997
    
    
    61.08
    %Profita Publishing Limited
    
    August 10, 2006
    
    
    61.08
    %Leguan Seed (Beijing) Culture Consulting Co. Ltd.
    
    May 30, 2006
    
    
    61.08
    %Subsidiaries of Variable Interest EntitiesHurray! Digital Media Technology Co., Ltd. (Hurray Digital Media)
    
    November 10, 2005
    
    
    100
    %Beijing Huayi Brothers Music Co., Ltd. (Huayi Brothers Music)
    
    December 31, 2005
    
    
    51
    %Beijing Huayi Brothers Music Broker Co., Ltd. (Huayi Brothers Broker)
    
    April 17, 2007
    
    
    51
    %Hurray! Freeland Digital Music Technology Co., Ltd. (Freeland Music)
    
    January 1, 2006
    
    
    60
    %Beijing Hurray! Freeland Culture Development Co., Ltd. (Freeland
Culture)
    
    January 8, 2007
    
    
    60
    %Beijing Hurray! Fly Songs International Culture Co., Ltd. (Beijing
Hurray! Fly Songs)
    
    August 21, 2007
    
    
    30.6
    %(1)Guangzhou Hurray! Secular Bird Art Co., Ltd. (Secular Bird)
    
    May 30, 2007
    
    
    65
    %Xi Fu Le (Beijing) Culture Broker Co., Ltd.
    
    July 14, 2009
    
    
    61.08
    %
 (1)
    
    Hurray! holds a 30.6% effective interest in Beijing Hurray! Fly Songs through a holding of 60%
interest in Freeland Music. Freeland Music owns a 51% equity interest in Beijing Hurray! Fly
Songs. Therefore, Beijing Hurray! Fly Songs is a consolidated entity of the Company.    F-10




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##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (1) Basis of presentation
  (2) Use of estimates
  (3) Consolidation
   (4) Significant risks and uncertainties
  (5) Fair value
   F-11




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(6) Business combinations and non-controlling interests
  Business combinations
  Classification and Measurement of Redeemable
Securities
  F-12




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(7) Foreign currency translation
      (8) Cash and cash equivalents
  (9) Short-term investments
  (10) Allowances for doubtful accounts
  (11) Inventories
   F-13




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##### Table of Contents



(12) Investment in affiliated company
   (13) Property and equipment, net
  Furniture and office equipment
    
    3 yearsMotor vehicles
    
    5 yearsTelecommunications equipment
    
    3 yearsLeasehold improvements
    
    Lesser of original lease term or estimated useful life
  (14) Acquired intangible assets, net
 Business combinations
 (15) Goodwill
   F-14




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(16) Impairment of long-lived assets
  (17) Financial instruments
  (18) Revenue recognition and cost of revenues
 Wireless value-added services
    F-15




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##### Table of Contents




    
    the Company is the primary obligor in the arrangement;
 
    
    the Company is able to establish prices within price caps prescribed by the
telecommunications operators to reflect or react to changes in the market;
 
    
    the Company determines the service specifications of the services it will be rendering;
    
    the Company is able to control the selection of its content suppliers; and
 
    
    the Telecom Operators usually will not pay the Company if users cannot be billed or
if users do not pay the Telecom Operators for services delivered and, as a result, the
Company bears the delivery and billing risks for the revenues generated with respect to
its services.
  Recorded Music
      F-16




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##### Table of Contents



(19) Product development expenses
  (20) General and administrative expenses
  (21) Selling and marketing expenses
  (22) Advertising costs
  (23) Stock-based compensation
   F-17




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(24) Leases
  (25) Taxation
    (26) Statutory reserves
      F-18




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##### Table of Contents



(27) (Loss) earnings per share
  (28) Comprehensive income (loss)
  (29) Recent accounting pronouncements
 Recognition and Presentation of Other-Than-Temporary Impairments
 Determining Whether a Market is Not Active and a Transaction Is Not Distressed
 Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies
 Subsequent
Events
  F-19




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The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles  a
replacement of FASB Statement No.162
 Accounting for
Transfers of Financial Assets  an amendment of FASB Statement No.140
 167 Amendments to FASB Interpretation No. 46(R)
 3.
BUSINESS COMBINATIONS
  (a) 2009 acquisition
 Acquisition of Seed Music Group Limited
   F-20




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##### Table of Contents



Total purchase price:Cash consideration
    
    
    2,507,438Contingent consideration (Note 10)
    
    
    352,217Fair value of redeemable non-controlling interests
    
    
    1,569,8084,429,463
 AmortizationperiodAggregate purchase price allocation Seed Music:Cash and cash equivalents
    
    
    1,034,308Inventory
    
    
    53,504Other current assets
    
    
    891,723Acquired intangible assets:Artist contracts
    
    
    1,717,846
    
    
    7.1~9.0 yearsTrademarks
    
    
    1,569,808
    
    
    20 yearsNon-compete agreement
    
    
    183,218
    
    
    4.5 yearsCopyrights
    
    
    5,863
    
    
    0.4 yearsNon-current deferred tax liability
    
    
    (869,184
    )Goodwill (allocated to music segment)
    
    
    2,535,523Property and equipment, net
    
    
    50,084Other non-current assets
    
    
    51,526Current liabilities
    
    
    (2,216,292
    )Other non-current liabilities
    
    
    (578,464
    )Total
    
    
    4,429,463
    F-21




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##### Table of Contents



Year Ended December 31,2008(unaudited)Net revenues
    
    
    60,044,387Net loss attributable to Hurray! Holding Co., Ltd.
    
    
    (12,933,442
    )Loss per ADS:- Basic
    
    
    (0.59
    )- Diluted
    
    
    (0.59
    )
 (b)
    
    2007 acquisitions Acquisition of Henan Yinshan and Saiyu
  Total purchase price:Cash consideration
    
    
    5,307,678Transaction costs
    
    
    21,0215,328,699
 Amortization periodAggregate purchase price allocation  Saiyu and Henan Yinshan:Cash and cash equivalents
    
    
    1,311,572Accounts receivable
    
    
    45,451Other current assets
    
    
    1,226Acquired intangible assets:Agreements with China Mobile
    
    
    1,946,402
    
    
    5 yearsWVAS license
    
    
    24,763
    
    
    3 yearsGoodwill allocated to WVAS segment
    
    
    2,134,375
    
    

    N/AProperty and equipment, net
    
    
    9,496
    
    
    3-5 yearsOther assets
    
    
    17,751Current liabilities
    
    
    (71,652
    )Non-current deferred tax liabilities
    
    
    (90,685
    )Total
    
    
    5,328,699
  F-22




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##### Table of Contents



Acquisition of Secular Bird and Beijing Hurray! Fly Songs
  Amortization periodAggregate purchase price allocation  Secular Bird and Beijing Hurray! Fly SongsCash and cash equivalents
    
    
    87,138Inventory
    
    
    10,747Other current assets
    
    
    116,559Acquired intangible assets:Artist contracts
    
    
    32,293
    
    
    4.6 yearsTrademarks
    
    
    24,644
    
    
    20 yearsCopyrights
    
    
    17,846
    
    
    1.9 yearsNon-complete contract
    
    
    4,249
    
    
    3.8 yearsGoodwill allocated to recorded music segment
    
    
    253,705
    

    
    N/AProperty and equipment, net
    
    
    53,375
    
    
    3-5 yearsOther assets
    
    
    1,402Current liabilities
    
    
    (11,108
    )Non-current deferred tax liabilities
    
    
    (14,784
    )Total
    
    
    576,066
  4. DISCONTINUED OPERATIONS
    F-23




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August 1, 2007unauditedCurrent assets of discontinued operationsCash
    
    
    771,746Accounts receivable, net of allowance
    
    
    1,868,593Prepaid expenses and other current assets
    
    
    18,942Amount due from related parties
    
    
    4,918,631Inventories
    
    
    1,3977,579,309Non-current assets of discontinued operations:Property and equipment, net
    
    
    49,842Rental deposits
    
    
    46250,304Current liabilities of discontinued operationsAccounts payable
    
    
    270,843Accrued expenses and other current liabilities
    
    
    605,739Dividend payable
    
    
    3,002,5883,879,170
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December
31, 2008
    
    

December
31, 2009(in U.S. dollars)Revenues
    
    
    227,391
    
    
    
    
    
    
    
    Operating loss
    
    
    (643,151
    )
    
    
    
    
    
    
    Income taxes
    
    
    178
    
    
    
    
    
    
    
    Net loss from discontinued operations, net of tax
    
    
    (612,170
    )
    
    
    
    
    
    
    Gain from disposal of SSI
    
    
    192,943
    
    
    
    412,530
    
    
    
    221,899Total net (loss) income from discontinued operations
    
    
    (419,227
    )
    
    
    412,530
    
    
    
    221,899
 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
  December 31, 2008
    
    
    December 31, 2009(in U.S. dollars)Staff advances and other receivables
    
    
    1,174,104
    
    
    
    350,097Advances to suppliers
    
    
    1,492,019
    
    
    
    681,670Prepaid expenses
    
    
    1,406,157
    
    
    
    397,024Prepaid artist costs
    
    
    98,043
    
    
    
    405,5704,170,323
    
    
    
    1,834,361
   F-24




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##### Table of Contents



6. PROPERTY AND EQUIPMENT, NET
  December 31, 2008
    
    
    December 31, 2009(in U.S. dollars)Furniture and office equipment
    
    
    3,066,923
    
    
    
    3,271,481Motor vehicles
    
    
    290,335
    
    
    
    336,778Telecommunications equipment
    
    
    4,556,290
    
    
    
    3,067,601Leasehold improvements
    
    
    663,307
    
    
    
    611,0118,576,855
    
    
    
    7,286,871Less: accumulated depreciation and amortization
    
    
    (7,596,795
    )
    
    
    (6,407,096
    )980,060
    
    
    
    879,775
  7. ACQUIRED INTANGIBLE ASSETS, NET
 December 31, 2009Gross carrying
    
    
    Accumulated
    
    
    Intangible assets
    
    
    Net carryingamount
    
    
    amortization
    
    
    impairment
    
    
    amountWVAS Segment:Amortizable intangible assetsWVAS licenses
    
    
    518,114
    
    
    
    400,847
    
    
    
    117,267
    
    
    
    Customer agreements with Telecom Operators
    
    
    2,849,884
    
    
    
    780,129
    
    
    
    2,069,755
    
    
    
    Non-compete agreements
    
    
    988,882
    
    
    
    355,413
    
    
    
    633,469
    
    
    
    Business transaction codes
    
    
    196,897
    
    
    
    164,081
    
    
    
    32,816
    
    
    
    Platform(1)
    
    
    473,784
    
    
    
    434,427
    
    
    
    39,357
    
    
    
    Software
    
    
    95,226
    
    
    
    95,226
    
    
    
    
    
    
    
    Trademarks
    
    
    174,336
    
    
    
    9,685
    
    
    
    164,651
    
    
    
    5,297,123
    
    
    
    2,239,808
    
    
    
    3,057,315
    
    
    
    Recorded Music Segment:Amortizable intangible assetsArtist contracts(2)
    
    
    6,700,617
    
    
    
    2,653,318
    
    
    
    3,840,082
    
    
    
    207,217Copyrights
    
    
    698,055
    
    
    
    552,944
    
    
    
    145,111
    
    
    
    Exclusive WVAS agreements
    
    
    584,873
    
    
    
    66,925
    
    
    
    478,590
    
    
    
    39,358Exclusive copyright agreements
    
    
    12,543
    
    
    
    11,498
    
    
    
    1,045
    
    
    
    WVAS contracts
    
    
    249,845
    
    
    
    249,845
    
    
    
    
    
    
    
    Non-compete agreements
    
    
    318,724
    
    
    
    38,102
    
    
    
    211,135
    
    
    
    69,487Software
    
    
    6,431
    
    
    
    4,431
    
    
    
    
    
    
    
    2,000Trademarks
    
    
    2,264,634
    
    
    
    176,610
    
    
    
    1,324,124
    
    
    
    763,90010,835,722
    
    
    
    3,753,673
    
    
    
    6,000,087
    
    
    
    1,081,96216,132,845
    
    
    
    5,993,481
    
    
    
    9,057,402
    
    
    
    1,081,962
  F-25




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##### Table of Contents



December 31, 2008Gross carrying
    
    
    Accumulated
    
    
    Intangible assets
    
    
    Net carryingamount
    
    
    amortization
    
    
    impairment
    
    
    amountWVAS
Segment:Amortizable intangible assetsWVAS licenses
    
    
    514,765
    
    
    
    397,440
    
    
    
    117,325
    
    
    
    Customer agreements with Telecom Operators
    
    
    2,851,304
    
    
    
    780,518
    
    
    
    2,070,786
    
    
    
    Non-compete agreements
    
    
    989,375
    
    
    
    355,590
    
    
    
    633,785
    
    
    
    Business transaction codes
    
    
    196,995
    
    
    
    164,163
    
    
    
    32,832
    
    
    
    Platform(1)
    
    
    474,020
    
    
    
    434,643
    
    
    
    39,377
    
    
    
    Software
    
    
    95,273
    
    
    
    95,273
    
    
    
    
    
    
    
    Trademarks
    
    
    174,423
    
    
    
    9,690
    
    
    
    164,733
    
    
    
    5,296,155
    
    
    
    2,237,317
    
    
    
    3,058,838
    
    
    
    Recorded Music Segment:Amortizable intangible assetsArtist contracts(2)
    
    
    4,917,694
    
    
    
    1,938,859
    
    
    
    1,739,848
    
    
    
    1,238,987Copyrights
    
    
    692,435
    
    
    
    527,163
    
    
    
    145,147
    
    
    
    20,125Exclusive WVAS agreements
    
    
    584,873
    
    
    
    52,465
    
    
    
    214,000
    
    
    
    318,408Exclusive copyright agreements
    
    
    12,543
    
    
    
    11,497
    
    
    
    1,046
    
    
    
    VAS contracts
    
    
    249,845
    
    
    
    249,845
    
    
    
    
    
    
    
    Non-compete agreements
    
    
    135,506
    
    
    
    8,117
    
    
    
    65,000
    
    
    
    62,389Software
    
    
    6,434
    
    
    
    3,146
    
    
    
    
    
    
    
    3,288Trademarks
    
    
    694,826
    
    
    
    100,701
    
    
    
    292,000
    
    
    
    302,1257,294,156
    
    
    
    2,891,793
    
    
    
    2,457,041
    
    
    
    1,945,32212,590,311
    
    
    
    5,129,110
    
    
    
    5,515,879
    
    
    
    1,945,322
 
 (1)
    
    The Platform represents the Wireless Application Protocol site owned by Hurray! Solutions
and the SMS Platform owned by Hengji Weiye.(2)
    
    The carrying amount of artist contracts represents the payments for agency agreements with
certain artists.  F-26




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##### Table of Contents



F-27




---



##### Table of Contents



2010
    
    
    125,5722011
    
    
    117,5752012
    
    
    86,1642013
    
    
    78,5112014 and later
    
    
    674,1401,081,962
 8. INVESTMENT IN EQUITY AFFILIATE
    F-28




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##### Table of Contents



9. GOODWILL
 Year ended December 31, 2009Gross amount of goodwill
    
    WVAS
    
    
    Recorded Music
    
    
    TotalBalance as of January 1,2008
    
    
    39,275,506
    
    
    
    5,123,907
    
    
    
    44,399,413Goodwill arising from acquisitions during the year
    
    
    80,504
    
    
    
    189,255
    
    
    
    269,759Effect of exchange rate changes
    
    
    2,554,011
    
    
    
    
    
    
    
    2,554,011Balance as of December 31, 2008
    
    
    41,910,021
    
    
    
    5,313,132
    
    
    
    47,223,153Goodwill arising from acquisitions during the year
    
    
    
    
    
    
    2,535,523
    
    
    
    2,535,523Effect of exchange rate changes
    
    
    (19,630
    )
    
    
    
    
    
    
    (19,630
    )Balance as of December 31, 2009
    
    
    41,890,391
    
    
    
    7,848,655
    
    
    
    49,739,046
 Accumulated impairment
    
    WVAS
    
    
    Recorded Music
    
    
    TotalBalance as of January 1,2008
    
    
    (38,778,507
    )
    
    
    
    
    
    
    (38,778,507
    )Goodwill impairment
    
    
    (518,714
    )
    
    
    (2,156,497
    )
    
    
    (2,675,211
    )Effect of exchange rate changes
    
    
    (2,612,800
    )
    
    
    
    
    
    
    (2,612,800
    )Balance as of December 31, 2008
    
    
    (39,410,021
    )
    
    
    (2,156,497
    )
    
    
    (44,066,489
    )Goodwill arising from acquisitions during the year
    
    
    
    
    
    
    2,535,523
    
    
    
    2,535,523Goodwill impairment
    
    
    
    
    
    
    (3,592,933
    )
    
    
    (3,592,933
    )Effect of exchange rate changes
    
    
    
    
    
    
    36
    
    
    
    36Balance as of December 31, 2009
    
    
    
    
    
    
    2,099,290
    
    
    
    2,099,290Net carrying amount as of December 31, 2008
    
    
    
    
    
    
    3,156,664
    
    
    
    3,156,664Net carrying amount as of December 31, 2009
    
    
    
    
    
    
    2,099,290
    
    
    
    2,099,290
     F-29




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##### Table of Contents



10. FAIR VALUE MEASUREMENTS
   Fair Value MeasurementsUsing Significant Unobservable Inputs(Level 3)Contingent considerationBeginning balance
    
    
    Contingent consideration recognized as of acquisition date
    
    
    (352,217
    )Change in fair value of contingent consideration
    
    
    550,092Impairment provision
    
    
    (197,875
    )Ending balance
    
    
    
     F-30




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##### Table of Contents



11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  December 31, 2008
    
    
    December 31, 2009Accrued payroll
    
    
    157,714
    
    
    
    572,489Accrued welfare benefits
    
    
    165,402
    
    
    
    667,756Accrued professional service fee
    
    
    230,958
    
    
    
    1,214,404Advance from customers
    
    
    422,406
    
    
    
    964,262Business tax payable
    
    
    955,901
    
    
    
    441,235Value-added tax payable
    
    
    104,435
    
    
    
    121,982Other taxes payable
    
    
    140,135
    
    
    
    1,185,791Other accrued expenses
    
    
    841,252
    
    
    
    1,092,9303,018,203
    
    
    
    6,260,849
 12. RELATED PARTY TRANSACTIONS AND BALANCES
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009Consulting, royalty and artist performance fee from
Huayi Brothers Media Corporation
    
    
    26,087
    
    
    
    281,795
    
    
    
    Consulting, production and marketing service fee from Huayi
Brothers Times Culture Broker Co., Ltd.
    
    
    
    
    
    
    
    
    
    
    281,580Royalty revenue from Shanghai Haiyue Music Distribution
Co., Ltd.
    
    
    185,510
    
    
    
    120,129
    
    
    
    Royalty revenue from Beijing Oriental Freeland Film Media
Co., Ltd.
    
    
    
    
    
    
    128,995
    
    
    
    CD distribution revenue from Beijing Century Freeland Film
Media Co., Ltd.
    
    
    262,520
    
    
    
    35,625
    
    
    
    52,248Royalty revenue from Guangdong Freeland Film Media Co., Ltd.
    
    
    64,450
    
    
    
    
    
    
    
    Royalty revenue from New Run
    
    
    106,567
    
    
    
    
    
    
    
    645,134
    
    
    
    566,544
    
    
    
    333,828
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009Content purchase, minimum guarantee and trade-name
usage fee to Huayi Brothers Media Corporation
    
    
    80,285
    
    
    
    58,501
    
    
    
    208,663Content purchase and information service fee to New Run
    
    
    16,440
    
    
    
    26,771
    
    
    
    15,053Expenses paid on behalf of Beijing Secular Bird
Culture Art Development Center
    
    
    
    
    
    
    19,009
    
    
    
    96,725
    
    
    
    104,281
    
    
    
    233,716
    F-31




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13. GAIN ON REDUCTION OF ACQUISITION PAYABLE
  14. FOREIGN EXCHANGE LOSS
  15. INCOME TAXES
         F-32




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##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    
    December 31, 2008
    
    

December 31, 2009Current
    
    
    576,774
    
    
    
    298,579
    
    
    
    750,705Deferred
    
    
    (759,144
    )
    
    
    187,671
    
    
    
    (516,419
    )(182,370
    )
    
    
    486,250
    
    
    
    234,286
  December 31,2008
    
    
    December 31, 2009Deferred tax assets:Cost and expenses accruals
    
    
    363,330
    
    
    
    2,709,145Less: valuation allowance
    
    
    
    
    
    
    (2,709,145
    )Current deferred tax assets
    
    
    363,330
    
    
    
    Depreciation and amortization
    
    
    330,035
    
    
    
    170,828Net operating loss carry forwards
    
    
    2,690,142
    
    
    
    5,502,682Less: valuation allowance
    
    
    (2,541,258
    )
    
    
    (5,063,370
    )Non-current deferred tax assets
    
    $
    478,919
    
    
    
    610,140Deferred tax liabilities:Revenue recognition
    
    
    (497,283
    )
    
    
    (622,456
    )Current deferred tax liabilities
    
    
    (497,283
    )
    
    
    (622,456
    )Intangible assets
    
    
    (292,194
    )
    
    
    (262,665
    )Non-current deferred tax liabilities
    
    
    (292,194
    )
    
    
    (262,665
    )
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009Statutory tax rate
    
    
    33.0%
    
    
    
    25.0%
    
    
    
    25.0%Differential statutory tax rates
    
    
    0.3%
    
    
    
    10.1%
    
    
    
    0.3%Non-deductible expenses
    
    
    (47.5%
    )
    
    
    (26.7%
    )
    
    
    (6.5%
    )Non-taxable income
    
    
    45.0%
    
    
    
    15.9%
    
    
    
    0.0%Change in enterprise income tax rate
    
    
    (8.6%
    )
    
    
    0.0%
    
    
    
    (0.0%
    )Change in valuation allowance
    
    
    (13.8%
    )
    
    
    (37.3%
    )
    
    
    (19.7%
    )Effective tax rate
    
    
    8.4%
    
    
    
    (13.0%
    )
    
    
    (0.9%
    )
   F-33




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16. ACQUISITION BY SHANDA INTERACTIVE ENTERTAINMENT LIMITED
  17. STOCK PLANS
 Stock option
    Ordinary sharesWeighted averageNumber of options
    
    
    exercise priceOptions outstanding at January 1, 2007
    
    
    80,506,600
    
    
    $
    0.085Exercised
    
    
    (653,400
    )
    
    $
    0.027Cancelled/Expired
    
    
    (5,587,000
    )
    
    $
    0.106Options outstanding at December 31, 2007
    
    
    74,266,200
    
    
    $
    0.084Exercised
    
    
    (60,000
    )
    
    $
    0.025Cancelled/Expired
    
    
    (26,838,500
    )
    
    $
    0.094Options outstanding at December 31, 2008
    
    
    47,367,700
    
    
    $
    0.080Exercised
    
    
    (350,000
    )
    
    $
    0.025Cancelled/Expired
    
    
    (1,435,000
    )
    
    $
    0.115Options outstanding at December 31, 2009
    
    
    45,582,700
    
    
    $
    0.080
  F-34




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##### Table of Contents



Options outstanding and exercisableWeighted averageremaining
    
    
    Weighted average
    
    
    Aggregated IntrinsicExercise Prices
    
    Number outstanding
    
    
    contractual life
    
    
    exercise price
    
    
    value$0.0250
    
    
    9,514,700
    
    
    
    2.58
    
    
    $
    0.0250
    
    
    $
    147,478$0.0705
    
    
    16,418,000
    
    
    
    3.49
    
    
    $
    0.0705
    
    
    
    $0.1170
    
    
    14,988,000
    
    
    
    4.00
    
    
    $
    0.1170
    
    
    
    $0.1025
    
    
    4,662,000
    
    
    
    5.00
    
    
    $
    0.1025
    
    
    
    Total
    
    
    45,582,700
    
    
    
    
    
    
    
    
    
    
    $
    147,478
  Non-vested shares
       Non-vested sharesOutstandingNon-vested stock units outstanding at January 1, 2007
    
    
    31,833,300Granted
    
    
    39,500,000Forfeited
    
    
    (10,400,200
    )Vested
    
    
    (11,099,300
    )Non-vested stock units outstanding at December 31, 2007
    
    
    49,833,800Granted
    
    
    Forfeited
    
    
    (17,834,200
    )Vested
    
    
    (18,499,300
    )Non-vested stock units outstanding at December 31, 2008
    
    
    13,500,300Granted
    
    
    Forfeited
    
    
    (3,999,900
    )Vested
    
    
    (6,500,300
    )Non-vested stock units outstanding at December 31, 2009
    
    
    3,000,100Expected to vest stock units at December 31, 2009
    
    
    1,950,065
  F-35




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##### Table of Contents



Non-vested shares outstandingNumber
    
    
    Aggregateoutstanding
    
    
    intrinsic valueGrant dateNovember 23, 2007
    
    
    3,000,100
    
    
    $
    121,504Total
    
    
    3,000,100
    
    
    $
    121,504
   18. SEGMENT INFORMATION
    F-36




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2009AssetsWVAS
    
    
    28,952,925
    
    
    
    24,400,482Recorded music
    
    
    16,977,258
    
    
    
    9,863,363Reconciling amounts
    
    
    42,394,219
    
    
    
    33,904,432Total assets
    
    
    88,324,402
    
    
    
    68,168,277Reconciling assets:Corporate assets
    
    
    42,394,219
    
    
    
    33,904,432
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009Total expenditures
for additions to
long-lived assetsWVAS
    
    
    755,921
    
    
    
    228,431
    
    
    
    599,254Recorded music
    
    
    107,682
    
    
    
    120,802
    
    
    
    79,028Total capital expenditure
    
    
    863,603
    
    
    
    349,233
    
    
    
    678,282
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009RevenuesWVAS
    
    
    50,038,014
    
    
    
    42,671,588
    
    
    
    20,169,110Recorded music
    
    
    10,488,613
    
    
    
    11,286,812
    
    
    
    14,473,185Total net revenues
    
    
    60,526,627
    
    
    
    53,958,400
    
    
    
    34,642,295Cost of revenuesWVAS
    
    
    36,394,300
    
    
    
    32,839,642
    
    
    
    15,331,675Recorded music
    
    
    6,232,728
    
    
    
    6,729,725
    
    
    
    12,625,139Total net revenues
    
    
    42,627,028
    
    
    
    39,569,367
    
    
    
    27,956,814Gross profitWVAS
    
    
    13,643,714
    
    
    
    9,831,946
    
    
    
    4,837,435Recorded music
    
    
    4,255,885
    
    
    
    4,557,087
    
    
    
    1,848,046Total net revenues
    
    
    17,899,599
    
    
    
    14,389,033
    
    
    
    6,685,481
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009RevenuesSMS
    
    
    10,948,524
    
    
    
    13,319,011
    
    
    
    5,307,435IVR
    
    
    17,325,223
    
    
    
    12,207,136
    
    
    
    3,943,733RBT
    
    
    3,719,470
    
    
    
    4,960,624
    
    
    
    4,447,9182G revenues
    
    
    31,993,217
    
    
    
    30,486,771
    
    
    
    13,699,086WAP
    
    
    12,530,200
    
    
    
    7,434,197
    
    
    
    3,145,885MMS
    
    
    1,313,397
    
    
    
    1,355,441
    
    
    
    1,692,585JAVA
    
    
    1,399,193
    
    
    
    2,244,010
    
    
    
    1,541,618WEB
    
    
    2,029,298
    
    
    
    218,810
    
    
    
    11,7942.5G revenues
    
    
    17,272,088
    
    
    
    11,252,458
    
    
    
    6,391,882Other revenues
    
    
    772,709
    
    
    
    932,359
    
    
    
    78,142Total WVAS revenue
    
    
    50,038,014
    
    
    
    42,671,588
    
    
    
    20,169,110Recorded music revenue
    
    
    10,488,613
    
    
    
    11,286,812
    
    
    
    14,473,185Total revenues
    
    
    60,526,627
    
    
    
    53,958,400
    
    
    
    34,642,295
  F-37




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Geographic Information
   F-38




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##### Table of Contents



19. LOSS PER SHARE
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    

December 31, 2008
    
    

December 31, 2009Numerator:Net loss attributable to Hurray! Holding Co., Ltd.
from continuing operations for basic and diluted
earnings per ADS
    
    
    (41,530,968
    )
    
    
    (12,365,126
    )
    
    
    (22,879,791
    )Net loss (income) attributable to Hurray! Holding
Co., Ltd. from discontinued operations for basic and
diluted earnings per ADSs
    
    
    (419,227
    )
    
    
    412,530
    
    
    
    221,899Net loss attributable to Hurray! Holding Co., Ltd.
    
    
    (41,950,195
    )
    
    
    (11,952,596
    )
    
    
    (22,657,892
    )Denominator:Weighted-average ordinary shares outstanding for
basic calculation
    
    
    2,172,208,190
    
    
    
    2,185,615,129
    
    
    
    2,196,291,947Dilutive effect of restricted shares and stock options
    
    
    
    
    
    
    
    
    
    
    Weighted average ordinary shares outstanding for
diluted calculation
    
    
    2,172,208,190
    
    
    
    2,185,615,129
    
    
    
    2,196,291,947Loss from continuing operations attributable to
Hurray! Holding Co., Ltd. ordinary shareholders per
share  basic and diluted
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    (0.01
    )Loss (income) from discontinued operations
attributable to Hurray! Holding Co., Ltd. ordinary
shareholders per share  basic and diluted
    
    
    (0.00
    )
    
    
    0.00
    
    
    
    0.00Loss attributable to Hurray! Holding Co., Ltd.
ordinary shareholders per share  basic and diluted
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
   20. CONCENTRATIONS
 (a) Dependence on Telecom Operators
   Year ended December 31, 2007
    
    

Year ended December 31, 2008
    
    

Year ended December 31, 2009Revenues
    
    
    %
    
    
    Revenues
    
    
    %
    
    
    Revenues
    
    
    %China Mobile
    
    
    29,921,502
    
    
    
    49
    %
    
    
    24,352,344
    
    
    
    45
    %
    
    
    10,074,902
    
    
    
    29
    %China Unicom
    
    
    12,789,026
    
    
    
    21
    %
    
    
    10,775,358
    
    
    
    20
    %
    
    
    5,068,739
    
    
    
    15
    %China Telecom
    
    
    5,054,984
    
    
    
    8
    %
    
    
    5,070,996
    
    
    
    9
    %
    
    
    4,405,260
    
    
    
    13
    %
  F-39




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2009Accounts receivable
    
    
    %
    
    
    Accounts receivable
    
    
    %China Mobile
    
    
    5,458,929
    
    
    
    43
    %
    
    
    744,428
    
    
    
    23
    %China Unicom
    
    
    2,632,764
    
    
    
    21
    %
    
    
    678,640
    
    
    
    21
    %China Telecom
    
    
    1,007,467
    
    
    
    8
    %
    
    
    228,914
    
    
    
    7
    %
 (b) Credit risk
  Movement of allowance for doubtful accounts
 Year ended
    
    
    Year endedDecember 31, 2008
    
    

December 31, 2009Balance at beginning of the period
    
    
    699,525
    
    
    
    826,026Consolidation of Seed Music
    
    
    
    
    
    
    425,065Provisions
    
    
    1,087,565
    
    
    
    3,710,897Reversed
    
    
    (190,860
    )
    
    
    (373,943
    )Written off
    
    
    (770,204
    )
    
    
    (969,918
    )Balance at the end of the period
    
    
    826,026
    
    
    
    3,618,127
 21. MAINLAND CHINA CONTRIBUTION PLAN AND STATUTORY RESERVES
  22. COMMITMENTS AND CONTINGENCIES
 Operating leases as lessee
   December 312010
    
    
    492,3372011
    
    
    262,5382012
    
    
    107,139Total
    
    
    862,014
  F-40




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##### Table of Contents



Artist contracts
  December 31,2010
    
    
    851,7232011
    
    
    872,5862012
    
    
    299,554Total
    
    
    2,023,863
 Contingent considerations for business acquisitions
    23. SUBSEQUENT EVENT
   F-41




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##### Table of Contents



24. RESTRICTED NET ASSETS
   F-42




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##### Table of Contents



HURRAY! HOLDING CO., LTD.
ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
HURRAY! HOLDING CO., LTD.
BALANCE SHEETS
(In U.S. dollars)
 December 31, 2008
    
    
    December 31, 2009(in U.S. dollars, except number of shares)AssetsCurrent assets:Cash
    
    
    39,519,423
    
    
    
    23,760,844Short term investments
    
    
    
    
    
    
    10,000,000Prepaid expenses and other current assets
    
    
    168,233
    
    
    
    134,436Total current assets
    
    
    39,687,656
    
    
    
    33,895,280Receivable on disposal of subsidiary
    
    
    46,860
    
    
    
    Prepaid investment cost
    
    
    1,907,400
    
    
    
    Investment at cost
    
    
    600,038
    
    
    
    Investments in subsidiaries and variable interest entities
    
    
    35,131,851
    
    
    
    22,158,284Investment in equity affiliate
    
    
    150,000
    
    
    
    Total assets
    
    $
    77,523,805
    
    
    
    56,053,564Liabilities and shareholders equityAccrued expenses and other current liabilities
    
    
    272,844
    
    
    
    1,280,994Amounts due to subsidiaries and variable interest entities
    
    
    341,676
    
    
    
    376,605Total current liabilities
    
    
    614,520
    
    
    
    1,657,599Shareholders equity:Ordinary shares ($0.00005 par value; 4,560,000,000 shares
authorized; 2,193,343,740 and 2,200,194,040 shares
issued and outstanding as of December 31, 2008 and
December 31, 2009, respectively)
    
    
    109,617
    
    
    
    109,959Additional paid-in capital
    
    
    75,012,693
    
    
    
    75,190,411Accumulated deficit
    
    
    (8,200,339
    )
    
    
    (30,858,231
    )Accumulated other comprehensive income
    
    
    9,987,314
    
    
    
    9,953,826Total shareholders equity
    
    
    76,909,285
    
    
    
    54,395,965Total liabilities and shareholders equity
    
    
    77,523,805
    
    
    
    56,053,564
  F-43




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##### Table of Contents



HURRAY! HOLDING CO., LTD.
ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
HURRAY! HOLDING CO., LTD.

STATEMENT OF OPERATIONS

(In U.S. dollars)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31,2009(in U.S. dollars, except number of shares)Operating expenses:Product development
    
    
    9,385
    
    
    
    105,283
    
    
    
    Selling and marketing
    
    
    286,885
    
    
    
    622,846
    
    
    
    118,521General and administrative
    
    
    2,440,417
    
    
    
    1,666,532
    
    
    
    5,520,453Total operating expenses
    
    
    2,736,687
    
    
    
    2,394,661
    
    
    
    5,638,974Loss from operations
    
    
    (2,736,687
    )
    
    
    (2,394,661
    )
    
    
    (5,638,974
    )Interest income
    
    
    2,082,629
    
    
    
    1,429,837
    
    
    
    355,616Interest expense
    
    
    (179,062
    )
    
    
    
    
    
    
    Other income
    
    
    105,485
    
    
    
    5,000,000
    
    
    
    Foreign exchange loss (gain)
    
    
    
    
    
    
    (8,990,067
    )
    
    
    1,085Gain from disposal of subsidiary
    
    
    192,943
    
    
    
    412,530
    
    
    
    221,899Equity in loss of subsidiaries, VIEs and affiliate
    
    
    (41,415,503
    )
    
    
    (7,410,235
    )
    
    
    (17,597,518
    )Net loss
    
    
    (41,950,195
    )
    
    
    (11,952,596
    )
    
    
    (22,657,892
    )
  F-44




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##### Table of Contents



HURRAY! HOLDING CO., LTD.
 
 ADDITIONAL INFORMATION  FINANCIAL STATEMENT SCHEDULE I
 HURRAY! HOLDING CO., LTD.  STATEMENTS OF CASH FLOWS  (In U.S. dollars)
 Year ended
    
    
    Year ended December
    
    
    Year endedDecember 31, 2007
    
    
    31, 2008
    
    
    December 31, 2009(In U.S. dollars)Operating activities:Net loss
    
    
    (41,950,195
    )
    
    
    (11,952,596
    )
    
    
    (22,657,892
    )Adjustments for:Stock-based compensation
    
    
    442,975
    
    
    
    945,282
    
    
    
    169,310Equity in profit of subsidiary companies
    
    
    41,415,503
    
    
    
    7,410,235
    
    
    
    17,447,518Impairment for investment in equity affiliate
    
    
    
    
    
    
    
    
    
    
    150,000Gain from disposal of subsidiary
    
    
    (192,943
    )
    
    
    (412,530
    )
    
    
    (221,899
    )Receivable from disposal of subsidiary
    
    
    (3,186,887
    )
    
    
    
    
    
    
    Gain on reduction of acquisition payable
    
    
    
    
    
    
    (5,000,000
    )
    
    
    Prepaid expenses and other current assets
    
    
    226,001
    
    
    
    56,064
    
    
    
    40,047Amount due from related parties
    
    
    5,843,380
    
    
    
    
    
    
    
    Other payables and accruals
    
    
    403,512
    
    
    
    (322,804
    )
    
    
    1,008,149Amount due to related parties
    
    
    530,756
    
    
    
    (189,080
    )
    
    
    34,929Net cash provided by (used in) operating activities
    
    
    3,532,102
    
    
    
    (9,465,429
    )
    
    
    (4,029,838
    )Investing activities:Increase of short-term investments
    
    
    
    
    
    
    
    
    
    
    (10,000,000
    )Proceeds from disposal of subsidiary
    
    
    
    
    
    
    4,517,070
    
    
    
    268,759Payments related to acquisitions consummated
    
    
    (2,833,658
    )
    
    
    (1,987,930
    )
    
    
    Payments related to acquisition not yet consummated
    
    
    
    
    
    
    (1,907,400
    )
    
    
    Investment in cost affiliate
    
    
    
    
    
    
    (600,038
    )
    
    
    Investment in subsidiary
    
    
    
    
    
    
    
    
    
    
    (2,000,000
    )Purchase of equity affiliate
    
    
    (150,000
    )
    
    
    
    
    
    
    Net cash used in (provided by) investing activities
    
    
    (2,983,658
    )
    
    
    21,702
    
    
    
    (11,731,241
    )Financing activities:Proceeds from exercise of options
    
    
    16,334
    
    
    
    1,500
    
    
    
    2,500Net cash provided by financing activities
    
    
    16,334
    
    
    
    1,500
    
    
    
    2,500Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    (99,879
    )
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    564,778
    
    
    
    (9,442,227
    )
    
    
    (15,758,579
    )Cash and cash equivalents, beginning of year
    
    
    48,496,751
    
    
    
    49,061,529
    
    
    
    39,519,423Cash and cash equivalents, end of the year
    
    
    49,061,529
    
    
    
    39,519,423
    
    
    
    23,760,844
 Note
    F-45