##### 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 (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, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report _______________
 For the transition period from ___________ to __________.
 Commission file number: 000-50975
 CHINA FINANCE ONLINE CO. LIMITED
 
  Not Applicable
 
  Hong Kong
 
  9th Floor of Tower C, Corporate Square
NO.35 Financial Street, Xicheng District
Beijing 100032, China
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  American Depositary Shares, each representing 5 ordinary shares,
 par value HK$0.001 per share *
 
  
 *
    
    Not for trading, but only in connection with the listing on the Nasdaq Global Market of American
Depository Shares each representing 5 ordinary shares pursuant to the requirements of the
Securities and Exchange Commission None
   o þ
  o þ
  þ o
  o þ o
  o þ
  o þ




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##### 



CHINA FINANCE ONLINE CO. LIMITED
 TABLE OF CONTENTS
 INTRODUCTIONPART IITEM 1
    
    Identity of Directors, Senior Management And Advisers
    
    
    5ITEM 2
    
    Offer Statistics and Expected Timetable
    
    
    5ITEM 3
    
    Key Information
    
    
    5ITEM 4
    
    Information on the Company
    
    
    33ITEM 5
    
    Operating and Financial Review and Prospects
    
    
    55ITEM 6
    
    Directors, Senior Management and Employees
    
    
    73ITEM 7
    
    Major Shareholders and Related Party Transaction
    
    
    82ITEM 8
    
    Financial Information
    
    
    89ITEM 9
    
    The Offer and Listing
    
    
    90ITEM 10
    
    Additional Information
    
    
    91ITEM 11
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    98ITEM 12
    
    Description of Securities Other than Equity Securities
    
    
    98PART IIITEM 13
    
    Defaults, Dividend Arrearages and Delinquencies
    
    
    98ITEM 14
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    99ITEM 15
    
    Controls and Procedures
    
    
    99ITEM 16A
    
    Audit Committee Financial Expert
    
    
    101ITEM 16B
    
    Code of Ethics
    
    
    101ITEM 16C
    
    Principal Accountant Fee and Services
    
    
    101ITEM 16D
    
    Exemption from the Listing Standard for Audit Committees
    
    
    102ITEM 16E
    
    Purchases of Equity Securities by the Issue and Affiliated Purchasers
    
    
    102PART IIIITEM 17
    
    Financial Statement
    
    
    102ITEM 18
    
    Financial Statements
    
    
    102ITEM 19
    
    Exhibits
    
    
    102EX-4.15 FRAMEWORK AGREEMENTEX-4.16 LOAN AGREEMENTEX-4.17 SHARE TRANSFER CONTRACTEX-4.18 SHARE PLEDGE AGREEMENTEX-4.19 PURCHASE OPTION AND COOPERATION AGREEMENTEX-4.20 PURCHASE OPTION AND COOPERATION AGREEMENTEX-4.21 CAPITAL INCREASE AGREEMENTEX-4.22 LOAN AGREEMENTEX-4.23 SHARE PLEDGE AGREEMENTEX-4.24 LOAN AGREEMENTEX-4.25 OPERATION AGREEMENTEX-4.26 TECHNICAL SUPPORT AGREEMENTEX-4.27 STRATEGIC CONSULTING AND SERVICE AGREEMENTEX-4.28 PURCHASE OPTION AGREEMENTEX-4.29 FRAMEWORK AGREEMENTEX-4.30 LOAN AGREEMENTEX-4.31 SHARE TRANSFER CONTRACTEX-4.32 OPERATION AGREEMENTEX-4.33 TECHNICAL SUPPORT AGREEMENTEX-4.34 STRATEGIC CONSULTING AND SERVICE AGREEMENTEX-4.35 PURCHASE OPTION AGREEMENTEX-4.37 LICENSE AGREEMENTEX-4.46 LEASE CONTRACTEX-4.47 LEASE CONTRACTEX-4.48 LEASE CONTRACTEX-4.49 LEASE CONTRACTEX-4.50 LEASE CONTRACTEX-4.51 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.52 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.53 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.54 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.55 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.56 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.57 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.58 AGREEMENT FOR THE SALE AND PURCHASE OF SHARESEX-4.67 ENGAGEMENT LETTEREX-8.1 LIST OF SUBSIDIARIESEX-10.1 CONSENT OF DELOITTE TOUCHE TOHMATSU CPA LTD.EX-12.1 CEO CERTIFICATION PURSUANT TO RULE 13A-14(A)EX-12.2 CFO CERTIFICATION PURSUANT TO RULE 13A-14(A)EX-13.1 CEO CERTIFICATION PURSUANT TO SECTION 906EX-13.2 CFO CERTIFICATION PURSUANT TO SECTION 906
  2




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INTRODUCTION
  
    
    we, us, our company and our refer to China Finance Online Co. Limited, or CFO
Hong Kong, its principle subsidiaries, China Finance Online (Beijing) Co., Ltd., or CFO
Beijing, Fortune Software (Beijing) Co., Ltd., or CFO Software, Stockstar Information
Technology (Shanghai) Co., Ltd., or CFO Stockstar, Shenzhen Genius Information Technology
Co., Ltd., or CFO Genius, Jujin Software (Shenzhen) Co., Ltd. or CFO Jujin, Zhengning
Information Technology (Shanghai) Co., Ltd., or CFO Zhengning, Fortune (Beijing) Wisdom
Technology Co., Ltd. or CFO Wisdom, Fortune (Beijing) Success Technology Co., Ltd. or CFO
Success, Daily Growth Securities Limited, or Daily Growth Securities, which we acquired in
November 2007 and subsequently renamed from Daily Growth Investment Company Limited to
Daily Growth Securities, and, in the context of describing our operations, also include
our PRC-incorporated affiliates, Fuhua Innovation Technology Development Co., Ltd., or CFO
Fuhua, Shanghai Meining Computer Software Co., Ltd., or CFO Meining, CFO Fuhuas wholly
owned subsidiary, Beijing CFO Glory Co., Ltd., or CFO Glory, and Beijing CFO Premium
Technology Co., Ltd., or CFO Premium.
    
    shares and ordinary shares refer to our ordinary shares, preferred shares refers
to our preferred shares, all of which were converted into our ordinary shares upon the
completion of our initial public offering on October 20, 2004, ADSs refers to our
American depositary shares, each of which represents five ordinary shares, and ADRs
refers to the American depositary receipts which evidence our ADSs;
    
    China or PRC refers to the Peoples Republic of China, excluding Taiwan, Hong Kong
and Macau;
    
    Hong Kong refers to the Hong Kong Special Administrative Region of the Peoples
Republic of China; and
    
    all references to Renminbi, RMB or yuan are to the legal currency of China, all
references to U.S. dollars, dollars, $ or US$ are to the legal currency of the
United States and all references to Hong Kong dollars or HK$ are to the legal currency
of Hong Kong. Any discrepancies in any table between totals and sums of the amounts listed
are due to rounding.
  FORWARD-LOOKING INFORMATION
  
    
    our goals and strategies, including how we effect our goals and strategies;
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
    
    our future business developments, business prospects, financial condition and results
of operations;
    
    our future pricing strategies or policies;
    
    our plans to expand our service offerings;
    
    our plans to use acquisitions and strategic investments as part of our corporate
strategy;
    
    competition in the PRC financial data and information services industry;
    
    performance of Chinas securities markets;
    
    performance of Hong Kongs securities markets;
    
    growth in our subscriber base;
    
    PRC governmental policies relating to taxes and how they will impact our business;
    
    PRC governmental policies relating to the Internet and Internet content providers;
    
    PRC governmental policies relating to the distribution of content, especially the
distribution of financial content over the Internet; and
    
    PRC governmental policies relating to mobile value-added services.
    4




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##### Table of Contents



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 .
  For the year ended December 31,(in thousands of U.S. dollars, except per share or per ADS data)(1)
    
    2003
    
    2004
    
    2005
    
    2006 (4)
    
    2007Consolidated statement of operations and
comprehensive income (loss) data:Net revenues
    
    
    2,271
    
    
    
    6,016
    
    
    
    7,482
    
    
    
    7,128
    
    
    
    25,903Cost of revenues
    
    
    (298
    )
    
    
    (393
    )
    
    
    (482
    )
    
    
    (1,468
    )
    
    
    (4,427
    )Gross profit
    
    
    1,973
    
    
    
    5,623
    
    
    
    7,000
    
    
    
    5,660
    
    
    
    21,476Operating expenses:General and administrative
    
    
    (400
    )
    
    
    (730
    )
    
    
    (1,740
    )
    
    
    (2,956
    )
    
    
    (7,784
    )Product development
    
    
    (149
    )
    
    
    (172
    )
    
    
    (236
    )
    
    
    (742
    )
    
    
    (2,269
    )Sales and marketing
    
    
    (284
    )
    
    
    (800
    )
    
    
    (1,795
    )
    
    
    (2,666
    )
    
    
    (6,924
    )Total operating expenses
    
    
    (833
    )
    
    
    (1,702
    )
    
    
    (3,771
    )
    
    
    (6,364
    )
    
    
    (16,977
    )Subsidy income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136Income (loss) from operations
    
    
    1,140
    
    
    
    3,921
    
    
    
    3,229
    
    
    
    (704
    )
    
    
    4,635Interest income
    
    
    51
    
    
    
    294
    
    
    
    1,486
    
    
    
    1,003
    
    
    
    1,105Other income (expense)
    
    
    (1
    )
    
    
    (2
    )
    
    
    
    
    
    
    115
    
    
    
    9Exchange gain (net)
    
    
    
    
    
    
    
    
    
    
    366
    
    
    
    267
    
    
    
    424Loss from impairment of cost method investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,322
    )
    
    
    (11,127
    )Income (loss) before income taxes
    
    
    1,190
    
    
    
    4,213
    
    
    
    5,081
    
    
    
    (641
    )
    
    
    (4,954
    )Income tax benefit (provision)
    
    
    
    
    
    
    384
    
    
    
    (457
    )
    
    
    41
    
    
    
    809Minority interests in net income of consolidated
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Net income (loss)
    
    $
    1,190
    
    
    $
    4,597
    
    
    $
    4,624
    
    
    $
    (600
    )
    
    $
    (4,130
    )Dividends on preference shares
    
    
    (352
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) attributable to
ordinary shareholders
    
    $
    838
    
    
    $
    4,597
    
    
    $
    4,624
    
    
    $
    (600
    )
    
    $
    (4,130
    )Income (loss) per share-basic
    
    $
    0.04
    
    
    $
    0.12
    
    
    $
    0.05
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Income (loss) per share-diluted
    
    $
    0.01
    
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Income per ADS equivalent-basic(2)
    
    $
    0.21
    
    
    $
    0.59
    
    
    $
    0.25
    
    
    $
    (0.03
    )
    
    $
    (0.22
    )Income per ADS equivalent-diluted(2)
    
    $
    0.06
    
    
    $
    0.26
    
    
    $
    0.22
    
    
    $
    (0.03
    )
    
    $
    (0.22
    )Dividends declared per ordinary share
or preference shares
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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For the year ended December 31,(in thousands of U.S. dollars)(1)
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007Consolidated balance sheet data:Cash and cash equivalents
    
    $
    5,806
    
    
    $
    70,596
    
    
    $
    46,168
    
    
    $
    44,956
    
    
    $
    74,729Current working capital(3)
    
    
    4,306
    
    
    
    67,590
    
    
    
    45,227
    
    
    
    38,011
    
    
    
    53,811Total assets
    
    
    6,606
    
    
    
    71,861
    
    
    
    63,113
    
    
    
    71,119
    
    
    
    103,885Deferred revenue, current
    
    
    1,278
    
    
    
    3,487
    
    
    
    1,859
    
    
    
    6,419
    
    
    
    20,457Total current liabilities
    
    
    1,875
    
    
    
    3,773
    
    
    
    2,282
    
    
    
    8,521
    
    
    
    31,009Deferred revenue, non-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,665Total shareholders equity
    
    $
    4,731
    
    
    $
    68,088
    
    
    $
    60,831
    
    
    $
    62,453
    
    
    $
    67,362





|    |  |                                                                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | For the results of operations for a specified period, all translations from Renminbi to U.S.
dollars were calculated by using the average of the exchange rates on each day during the
period. All translations from Renminbi to U.S. dollars were calculated for the periods listed
below at the corresponding rates

For the years ended December 31,
    
    RMB per US$1.002003
    
    
    8.27702004
    
    
    8.27802005
    
    
    8.14722006
    
    
    7.96932007
    
    
    7.6072




As at December 31,
    
    RMB per US$1.002003
    
    
    8.27692004
    
    
    8.27652005
    
    
    8.07022006
    
    
    7.80872007
    
    
    7.2946


|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Each ADS represents five ordinary shares.                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) |  | Current working capital is the difference between total current assets and total current
liabilities.                                                                                                                                                                                                                                                                                                                                                   
|   
|(4) |  | In 2006, the Company changed its method of accounting for stock-based compensation to conform
to Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment,
effective on January 1, 2006. In 2007, the Company adopted the recognition and measurement
methods under Financial Accounting Standards Board Interpretation No. 48 Accounting for
Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109.

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Exchange Rate Information
    Average(1)
    
    High
    
    Low
    
    Period-end(RMB per U.S.$1.00)2003
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2765
    
    
    
    8.27692004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.27652005
    
    
    8.1472
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.07022006
    
    
    7.9693
    
    
    
    8.0705
    
    
    
    7.8051
    
    
    
    7.80872007
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.2946
    
    
    
    7.29462008 (through May 15, 2008)
    
    
    7.0731
    
    
    
    7.2946
    
    
    
    6.9815
    
    
    
    6.9943
 
 (1)
    
    Averages are calculated from month-end rates. B. Capitalization and indebtedness.
  C. Reasons for the offer and use of proceeds.
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D. Risk factors.
 Risks relating to our business
 Negative changes in Chinas securities markets, economic conditions, inflation, regulatory
policies, interests rates and other factors that could affect investors interests in investing in
Chinas securities markets could have an adverse effect on our business.
    Downturns, disruptions and volatility in Hong Kong securities markets and negative developments in
the business, economic, and market conditions that could affect investors interests in investing
in Hong Kong securities markets could have adverse impact on our business in the future.
  Our securities brokerage business in Hong Kong operates in a highly regulated industry and
compliance failures could adversely affect our business.
  8




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Our business could be materially and adversely affected if new features and new research tools are
not accepted by users.
  We have a limited operating history, which may make it difficult for you to evaluate our business.
  We may not be able to successfully implement our growth strategies, which could materially and
adversely affect our business, financial condition and results of operations.
  www.jrj.com www.stockstar.com
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We face significant competition which could adversely affect our business, financial condition and
results of operations .
    Our business could be materially and adversely affected if the stock exchanges from which we
receive data and information fail to deliver us reliable data and price quotes or other trading
related information, or if we cannot maintain our current business relationships with our
historical data providers on commercially reasonable terms.
  10




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Our business would be adversely affected if we do not continue to expand and maintain an effective
telemarketing and customer support force.
  11




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Acquisitions present many risks, and we may not realize the financial and strategic goals that were
contemplated at the time of any transaction.
 I
 
    
    the acquisition may not further our business strategy, or we may pay more than it is
worth;
    
    we may not realize the anticipated increase in our revenues if we are unable to sell
the acquired companys products to our customer base, or the acquired contract models of
acquired contract models companies;
    
    we may have difficulty identifying suitable acquisition opportunities and integrating
acquired companies with our existing operations or their products and services with our
existing products and services;
    
    we may have higher than anticipated costs in continuing support and development of
acquired products;
    
    we may have multiple and overlapping product lines that are offered, priced and
supported differently, which could cause customer confusion and delays;
    
    our due diligence process may fail to identify problems, such as issues with unlicensed
use of intellectual property;
    
    we may have legal and tax exposures or lose anticipated tax benefits as a result of
unforeseen difficulties in our legal entity integration activities;
    
    we may face contingencies related to intellectual property, financial disclosures and
accounting practices or internal controls;
    
    our ongoing business may be disrupted and our managements attention may be diverted by
transition or integration issues; and
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
    
    to the extent that we issue a significant amount of equity securities in connection
with future acquisitions, existing ADS holders and shareholders may be diluted and
earnings per share may decrease.
  Our plan to make strategic investments may negatively affect our business due to the poor financial
condition and operating performance of those companies we invest in and other risks.
   Our business could be materially and adversely affected if increased usage strains our server
systems or if we suffer from other system malfunctions.
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If we are not able to respond successfully to technological or industry developments, our business
may be materially and adversely affected.
  We may be subject to, and may expend significant resources in defending against claims based on the
content and services we provide through our website and our research tools.
  We may be subject to intellectual property infringement claims, which may force us to incur
substantial legal expenses and, if determined adversely against us, may materially disrupt our
business.
  Unauthorized use of our intellectual property by third parties, and the expenses incurred in
protecting our intellectual property rights, may adversely affect our business.
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We depend on our key personnel and our business and growth prospects may be severely disrupted if
we lose their services.
   Recent changes in the PRCs labor law restrict our ability to reduce our workforce in the PRC in
the event of an economic downturn and may increase our labor costs.
  15




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Undetected programming errors or defects in our research tools could materially and adversely
affect our business, financial condition and results of operations.
  If tax benefits currently available to us in PRC were no longer available under the new Enterprise
Income Taxes (EIT) law which became effective on January 1, 2008, our effective income tax rates
for our PRC operations could increase.
  
    
    Exempting the company from state income tax for 2003 and 2004; and
    
    Providing the company a preferential state income tax rate of 12% from 2005 to 2007, the
rate currently applicable to wholly foreign-owned enterprises based in Beijing and not
subject to other tax holidays.
  
    
    Exempting the company from enterprise income tax from 2005 to 2007; and
    
    Providing the company a preferential enterprise income tax rate of 7.5% from 2008 to
2010, and 15% for taxable years thereafter, the rate currently applicable to companies
classified as high-technology companies based in Beijing and not subject to other tax
holidays, provided that the company continues to be qualified as a high and new technology
enterprise under the newly enacted PRC Enterprise Income Tax Law taking effect as of
January 1, 2008.
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Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC
withholding tax.
  We may be deemed a PRC resident enterprise under the EIT Law and be subject to the PRC taxation on
our worldwide income.
  Dividends payable by us to our foreign investors and gain on the sale of our ADSs or ordinary
shares may become subject to taxes under PRC tax laws.
  18




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We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax
consequences to U.S. investors.
    Because there is limited business insurance coverage in China, any business disruption or
litigation we experience might result in our incurring substantial costs and the diversion of
resources.
  Risks relating to our industry
 The Internet infrastructure in China, which is not as well developed as in the United States or
other more developed countries, may limit our growth.
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The limited use of personal computers in China and the relatively high cost of Internet access with
respect to per capita gross domestic product may limit the development of the Internet in China and
impede our growth.
  We depend largely on the infrastructure of the telecommunications operators in China, and any
interruption of their network infrastructure may result in severe disruptions to our business.
   Unexpected network interruptions, security breaches or computer virus attacks could have a material
adverse effect on our business, financial condition and results of operations.
  
    
    Any break-downs or system failures resulting in a sustained shutdown of all or a
material portion of our servers, including failures which may be attributable to sustained
power
 20




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shutdowns, or efforts to gain unauthorized access to our systems causing loss or corruption
of data or malfunctions of software or hardware; and
 
    
    Any disruption or failure in the national backbone network, which would prevent our
users from logging on to our website or accessing our services.
  Concerns about the security and confidentiality of information on the Internet may increase our
costs, reduce the use of our website and impede our growth.
  Risks relating to regulation of our business and to our structure
 We rely on contractual arrangements with CFO Fuhua, CFO Glory and CFO Premium, our PRC-incorporated
affiliates, and their shareholders for our China operations, which may not be as effective in
providing operational control as direct ownership. If the affiliates fail to perform its
obligations under these contractual arrangements or PRC laws impair the enforceability of these
contracts, our business, financial condition and results of operations may be materially and
adversely affected.
   21




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If the PRC government finds that the financial data and information services we provide do not
comply with Chinese laws and regulations relating to the provision of securities investment
advisory services, we may suffer severe disruption to our business operations and lose
substantially all of our revenue.
   If the PRC government finds that the agreements that establish the structure for operating our
China business do not comply with PRC government restrictions on foreign investment in the online
financial data and information service industry, we could be subject to severe penalties .
 22




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www.jrj.com and www.stockstar.com
   
    
    Revoking business and operating licenses of CFO Beijing, CFO Software, CFO Stockstar,
CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or CFO Meining;
    
    Discontinuing or restricting our operations or those of CFO Beijing, CFO Software, CFO
Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or
CFO Meining;
    
    Imposing conditions or requirements with which we, CFO Beijing, CFO Software, CFO
Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or
CFO Meining;
 23




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##### Table of Contents




    
    Requiring us, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO
Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or CFO Meining to restructure the relevant
ownership structure or operations;
    
    Restricting or prohibiting our use of the proceeds of our initial public offering in
2004 to finance our business and operations in China; or
    
    Taking other regulatory or enforcement actions, including levying fines that could be
harmful to our business.
  Our contractual arrangements with CFO Fuhua may be subject to scrutiny by the PRC tax authorities
and create a potential double layer of taxation for our revenue-generating services conducted by
CFO Fuhua.
  We rely principally on dividends and other distributions on equity paid by our wholly owned
operating subsidiaries to fund any cash and financing requirements we may have.
  The PRC government may prevent us from distributing, and we may be subject to liability for,
content that it believes is inappropriate.
 24




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Risks relating to the Peoples Republic of China
  The PRCs economic, political and social conditions, as well as government policies, could affect
the financial markets in China and our business.
  25




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The PRC legal system embodies uncertainties which could limit the legal protections available to
you and us.
  Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
  Fluctuations in exchange rates could result in foreign currency exchange losses.
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Risks relating to our shares and ADSs
 Stock prices of Internet-related companies, particularly companies with business operations
primarily in China, have fluctuated widely in recent years, and the trading prices of our ADSs are
likely to be volatile, which could result in substantial losses to investors.
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If we grant employee share options and other share-based compensation in the future, our net income
could be materially and adversely affected.
  The sale or availability for sale of substantial amounts of our ADSs could adversely affect their
market price.
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A significant percentage of our outstanding ordinary shares are held by a small number of our
shareholders, and these shareholders may have significantly greater influence on us and our
corporate actions by nature of the size of their shareholdings relative to our public shareholders.
  Provisions in our charter documents and Hong Kong law, and change in control agreements we have
entered into with each of our each of our executive officers, may discourage our acquisition by a
third party, which could limit your opportunity to sell your shares at a premium.
  
    
    Our articles of association provide for a staggered board, which means that our
directors, excluding our chief executive officer, are divided into two classes, with half
of our board, excluding our chief executive officer, standing for election every two
years. Our chief executive officer will at all times serve as a director, and will not
retire as a director, so long as he remains our chief executive officer. This means that,
with our staggered board, at least two annual shareholders meetings, instead of one, are
generally required in order to effect a change in a majority of our directors. Our
staggered board can discourage proxy contests for the election of our directors and
purchases of substantial blocks of our shares by making it more difficult for a potential
acquirer to take control of our board in a relatively short period of time.
    
    Hong Kong law permits shareholders of a company to remove directors by a shareholders
resolution. Our articles of association require any shareholder who wishes to remove a
director in this way to give us at least 120 days notice of the resolution, making it
more difficult and time consuming for a potential acquirer who has
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accumulated a substantial voting position to obtain control of our board by removing
opposing directors.
 
    
    Our articles of association provide that our board can have no less than five and no
more than nine directors. Our board currently has five directors. Any increase in the
maximum number of directors on our board beyond nine directors can only be accomplished by
amending our articles of association, which under Hong Kong law requires a shareholders
supermajority vote of 75% and at least 21 days notice. These restrictions can make it
more difficult for a potential acquirer who has accumulated a majority of our shares to
take control of us by promptly increasing the size of our board and appointing new
directors that are its nominees.
    
    Hong Kong does not have merger laws that permit Hong Kong companies to merge in the
same way as U.S. companies could in the U.S. However, the Hong Kong Companies Ordinance
has provisions that facilitate arrangements for the reconstruction and amalgamation of
companies. The arrangement must be approved by a majority in number of each class of
shareholders and creditors with whom the arrangement is to be made, representing
three-fourths in value of each such class of shareholders or creditors that are present
and voting either in person or by proxy at meetings convened by the High Court of Hong
Kong. The arrangements must be sanctioned by the High Court of Hong Kong after
shareholders or creditors approve it at the court-convened meeting.
    
    Our shareholders have authorized our board of directors, without any further action by
shareholders, to issue additional shares. Under Hong Kong law, the authority granted by
our shareholders will remain valid until the conclusion of our next annual general
meeting, or the time when our next annual general meeting is required to be held. For as
long as this approval remains effective, or is renewed, our board of directors will have
the power to issue additional ordinary shares (including ordinary shares represented by
ADSs) and preference shares without any further action by shareholders.
 We are a Hong Kong company and because the legal and procedural protections afforded minority
shareholders under Hong Kong law differ from those under U.S. law, you may have difficulty
protecting your interests as our shareholder relative to shareholders of corporations organized in
the U.S.
  
    
    to recognize or enforce against us judgments of courts of the United States based on
the civil liability provisions of U.S. securities laws; or
    
    to allow original actions brought in Hong Kong, based on the civil liability provisions
of U.S. securities laws that are penal in nature.
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The voting rights of holders of ADSs must be exercised in accordance with the terms of the deposit
agreement, the American depositary receipts, and the procedures established by the depositary. The
process of voting through the depositary may involve delays that limit the time available to you to
consider proposed shareholders actions and also may restrict your ability to subsequently revise
your voting instructions.
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You may not receive distributions on our ordinary shares or any value for them if such distribution
is illegal or if any required government approval cannot be obtained in order to make such
distribution available to you.
  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.
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ITEM 4. INFORMATION ON THE COMPANY
 A. History and development of the company.
 www.jrj.com.cn, www.jrj.com,
    www.stockstar.com
  33




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B. Business overview.
  
    
    financial analysis tools that permit users to calculate and analyze quantitatively
financial data;
    
    current and historical financial data and information for Chinas listed company
stocks, bonds and mutual funds;
    
    categorized news and research reports; and
    
    online forums and bulletin boards.
  34




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www.jrj.com www.stockstar.com
   Comprehensive.
  Integrated.
  35




---



##### Table of Contents



Interactive.
  Timely.
  Unbiased.
  Easy to use.
   36




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##### Table of Contents



Growth Strategy
   
    
    increase our sales force scale and improve efficiency by recruiting more telemarketing
sales personnel and training them with better sales skills;
    
    increase our subscriber base by expanding distribution channels such as banks, mutual
funds and brokerage firms;
    
    build our customer database by better understanding and in depth mining registered
users;
    
    upgrade our existing service offerings and expand our present service offerings to
include data and information relating to other financial instruments such as mutual funds,
currencies, futures and commodities; and
    
    continue to encourage our subscribers to migrate to newer, more comprehensive and
higher priced service offerings.
  
    
    acquire strategic resources and capabilities in order to strength entry barriers,
expand business scale, diverse revenue resources and monetize registered user base; and
    
    get access to complementary resources and capabilities through strategic partnership
that enables to penetrate into a bigger market in order to solidify our leading position
and enhance our brand awareness.
 Our Subscription Services
  Our features
  Financial analysis tools.
  37




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##### Table of Contents




    
    Fundamental analysis tools, which are designed to enable investors to analyze data
based on company fundamentals; and
    
    Technical analysis tools, which are designed to enable investors to analyze data based
on trends formulated by historical trading data.
  Real-time and historical data.
   News.
  Research reports.
  Online forums.
  38




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Our websites
  
    
    to attract visitors and market our subscription based service offerings;
    
    to store content and serve as an integral part of our information platform;
    
    to serve as download platforms for our service offerings; and
    
    to display online advertisements.
     Our research tools
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##### Table of Contents




    
    Categorized macro information. This feature allows subscribers to search and sort
up-to-date and comprehensive news and information relating to the broader financial
markets or a specific financial topic or industry sector. We have a dedicated team of
professional editors who collect, organize, categorize and index macro-economic and
financial market information on a daily basis, according to user feedback and
classification methods that we believe are accepted practice in securities markets in
China.
    
    Industry sector analysis. Many investors in China seek to distinguish between listed
companies with investment potential and those prone to financial trouble by analyzing
listed companies financial data published in their financial statements and comparing
such data among companies within the same industry sector. We collect and process listed
company financial data and information according to classification methods set by relevant
PRC regulatory authorities, and allow subscribers to view the relative standings of listed
companies in the same industry sector or geographical locations based on market accepted
performance parameters such as price-to-earnings ratios and profit margins.
    
    Fundamental analysis. Historical and real-time financial information are important to
investors because they provide insight into company fundamentals. This research tool
integrates the historical and real-time trading information we maintain in our database,
as well as fundamental financial information such as earnings-per-share, shareholdings and
other related data and information. Our subscribers can receive fundamental financial and
trading information organized by their specifications and display these results on a
graphical interface that we designed to be easy to visualize and navigate.
    
    Mutual fund analysis. Our mutual fund research tool focuses on categorizing information
relating to the portfolio holdings of mutual funds. This feature allows subscribers to
study the collective effect of large market players on individual stocks. This feature
also offers information relating to the performance of individual mutual funds, allowing
subscribers to assess the risks and rewards of investing in mutual funds.
    
    Technical analysis. This feature allows investors interested in trends formulated by
historical trading data to perform technical analysis on listed companies. With over 60
markets accepted technical indicators and a complete database of historical data and
information on all of Chinas listed company stocks, our subscribers can perform extensive
chart analysis and pattern recognition on any stock listed on Chinas stock exchanges.
  Our securities service packages.
 
    
    Securities Market Data. Our Securities Market Data service packages are developed on
the basis of Level II quotes and TopView data licensed from Shanghai Stock Exchange. On June 15,
2006, we entered into an agreement with Shanghai Stock Exchange Information Network Co., Ltd.,
(SSEINC) which is associated with the Shanghai Stock Exchange, or SSE. Under the definitive
agreement, we are certified by SSE to develop service packages based on Level II quotes, and
upgrade the features and functions of our current products. The definitive agreement is
contemplated to continue through April 30, 2009.
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
    
    Technical Analysis. Technical Analysis involves researching historical price and
volume data, patterns and trends to predict the performance of a given stock. This type of analysis
focuses on chart formations and formulas to identify major and minor trends to recognize buying
opportunities and exit points.
    
    Fundamental Analysis. Fundamental Analysis involves examining the companys
financials and operations, especially sales, earnings, growth potential, assets, debt, management,
products, and competition. Fundamental Analysis takes into consideration only those variables that
are directly related to the company itself, rather than the overall state of the market or
technical analysis data.
 Pricing policy
   Our brokerage services
  Our online advertisement services
 www.jrj.com www.stockstar.com
 41




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Customer support
  Our content providers
  Shanghai and Shenzhen Stock Exchanges
    42




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Data providers
  Financial Institutions, securities advisors and stock brokerages
  News and media conglomerates
  Chinese news publishers and media companies
  Sales and marketing
   43




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##### Table of Contents



Product development
    
    
    to increase the breadth of our service offerings through the addition of new features
and functions to our service packages;
    
    to enhance our subscribers experience by improving the quality of our research tools
and website;
    
    to develop additional research tools, features and content specifically targeting the
high-end subscribers; and
    
    to design and build new financial instrument service products that fit our strategies.
 Technology and infrastructure
  Web server technology.
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##### Table of Contents



Database technology.
  Remote data aggregation engine.
  Competition
  
    
    publishers and distributors of traditional media, including print, radio and
television, such as China Securities News, Shanghai Securities News, International
Financial Times, 21st Century Economic Reports, as well as radio and television programs
and news focused on financial news and information;
    
    internet portals providing information on business, finance and investing, such as
sina.com.cn and sohu.com;
    
    financial information web pages offered by websites such as hexun.com;
    
    personal stock research software vendors, such as Shanghai Qian Long High Tech
Corporation, that develop and market stock research software through stock brokerage
companies; and
    
    stock brokerage companies, especially stock brokerage companies with online trading
capabilities, such as Haitong Securities.
   45




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Intellectual property
   www.stockstar.com www.jrj.com.cn
 Regulation
  
    
    Ministry of Industry and Information;
    
    the China Securities Regulatory Commission;
    
    the Ministry of Culture;
    
    the General Administration of Press and Publication (National Copyright
Administration);
    
    the State Administration of Industry and Commerce;
    
    the Ministry of Public Security; and
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
    
    the Ministry of Commerce.
  Foreign ownership restriction on Internet content provision businesses
   Licenses and permits
      Regulation of Internet content
 47




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Regulation of information security
   Intellectual property rights
   48




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www.jrj.com and www.stockstar.com,
 Website name
  Privacy protection
  Advertising regulation
  Brokerage regulations in Hong Kong
  C. Organizational structure.
  49




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##### Table of Contents



Percentage ofJurisdiction
    
    Beneficialof
    
    OwnershipName
    
    Incorporation
    
    InterestFortune Software (Beijing) Co., Ltd
    
    PRC
    
    
    100China Finance Online (Beijing) Co., Ltd.
    
    PRC
    
    
    100Beijing Fuhua Innovation Technology Development
Co., Ltd. *
    
    PRC
    
    
    100Stockstar Information Technology (Shanghai) Co., Ltd
    
    PRC
    
    
    100Shanghai Meining Computer Software Co., Ltd.*
    
    PRC
    
    
    100Zhengning Information & Technology (Shanghai) Co.,
Ltd.
    
    PRC
    
    
    100Shenzhen Genius Information Technology Co., Ltd.
    
    PRC
    
    
    100Jujin Software (Shenzhen) Co., Ltd.
    
    PRC
    
    
    100Fortune (Beijing) Wisdom Technology Co., Ltd.
    
    PRC
    
    
    100Fortune (Beijing) Success Technology Co., Ltd.
    
    PRC
    
    
    100Beijing CFO Glory Co., Ltd*
    
    PRC
    
    
    100Beijing CFO Premium Technology Co., Ltd*
    
    PRC
    
    
    100Daily Growth Securities Limited
    
    Hong Kong
    
    
    98.5
 
 *
    
    Denotes variable interest entity 50




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##### Table of Contents



(1)
    
    Zhiwei Zhao is our chief executive officer and director.(2)
    
    Jun Wang is our chief financial officer.(3)
    
    Zhenfei Fan is our financial manager.(4)
    
    Wei Xiong is our director of Human Resource and Administrative Department.
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www.jrj.com.cn www.jrj.com
  
    
    an equipment leasing agreement, pursuant to which CFO Fuhua leases a substantial
majority of its operating assets from CFO Beijing;
    
    a technical support agreement, pursuant to which CFO Beijing provides technical support
for CFO Fuhuas operations;
    
    an amended and restated strategic consulting agreement, pursuant to which CFO Beijing
provides strategic consulting services to CFO Fuhua, including consulting services in
relation to CFO Fuhuas online advertising business;
  
    
    the shareholders of CFO Fuhua have granted us or individuals designated by us an
irrevocable proxy to exercise all their voting rights as shareholders of CFO Fuhua,
including the right to appoint directors, the general manager and other senior management
of CFO Fuhua;
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
    
    CFO Fuhua will not enter into any transaction that may materially affect its assets,
liabilities, equity or operations without our prior written consent;
    
    CFO Fuhua will not distribute any dividends;
    
    we may purchase the entire equity interest in, or all the assets of, CFO Fuhua when and
if such purchase is permitted by PRC law or the current shareholders of CFO Fuhua cease to
be directors or employees of CFO Fuhua;
    
    the shareholders of CFO Fuhua have pledged their equity interest in CFO Fuhua to CFO
Beijing to secure the payment obligations of CFO Fuhua under the equipment leasing
agreement, the technical support agreement and the amended and restated strategic
consulting agreement between CFO Beijing and CFO Fuhua; and
    
    the shareholders of CFO Fuhua will not transfer, sell, pledge, dispose of or create any
encumbrance on their equity interest in CFO Fuhua without the prior written consent of CFO
Beijing.
    53




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##### Table of Contents




    
    the shareholders of CFO Premium have granted us or individuals designated by us an
irrevocable proxy to exercise all their voting rights as shareholders of CFO Premium,
including the right to appoint directors, the general manager and other senior management
of CFO Premium;
    
    CFO Premium will not enter into any transaction that may materially affect its assets,
liabilities, equity or operations without our prior written consent;
    
    CFO Premium will not distribute any dividends;
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##### Table of Contents




    
    we may purchase the entire equity interest in, or all the assets of, CFO Premium when
and if such purchase is permitted by PRC law or the current shareholders of CFO Premium
cease to be employees of CFO Premium;
    
    the shareholders of CFO Premium will not transfer, sell, pledge, dispose of or create
any encumbrance on their equity interest in CFO Premium without our prior written consent.
   D. Property and equipment.
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion of our financial condition and results of operations is based upon and
should be read in conjunction with our consolidated financial statements and their related notes
included in this annual report on Form 20-F. This report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, including, without limitation, statements regarding our expectations, beliefs,
intentions or future strategies that are signified by the words expect, anticipate, intend,
believe, or similar language. All forward-looking statements included in this annual report are
based on information available to us on the date hereof, and we assume no obligation
 55




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to update any such forward  looking statements. Actual results could differ materially from those
projected in the forward  looking statements. In evaluating our business, you should carefully
consider the information provided under the caption Risk Factors in this annual report on Form
20-F. We caution you that our businesses and financial performance are subject to substantial risks
and uncertainties.
 A. Operating Results
 www.jrj.com and stockstar.com
   Key factors affecting our operating results and financial condition
  
    
    performance of Chinas securities markets, and user demand for market intelligence on
Chinas securities markets, as well as the overall performance of Chinas economy;
    
    contribution of alternative revenue resources such as revenues from online advertising;
    
    seasonality associated with the level of activity of our users and subscribers and the
trading activities of Chinas securities markets;
    
    tax refund from the PRC tax authorities for value-added-taxes we are required to pay on
the sale of subscriptions to our service packages;
    
    other tax incentives we receive from PRC tax authorities resulting from CFO Beijing
being a foreign invested software development company and CFO Software being a foreign
invested high-technology company;
    
    our cost structure, including, in particular, our cost for raw data;
    
    the desirability of our service packages relative to other products and offerings
available in the market;
 56




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##### Table of Contents




    
    our ability to benefit from the acquisition of CFO Stockstar, CFO Genius, and Daily
Growth Securities; and
    
    PRC telecommunication and regulatory policies.
    Gross revenues
   
    
    the number of registered user accounts on our websites;
    
    the number of active paying individual subscribers; and
    
    the service packages selected by our subscribers.
 www.jrj.com www.stockstar.com www.jrj.com www.stockstar.com
  57




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Net revenues
   Years ended December 31,2005
    
    
    2006
    
    
    2007Subscription fees
    
    $
    5,811,395
    
    
    $
    5,075,830
    
    
    $
    22,712,043Advertising revenue
    
    
    996,311
    
    
    
    1,337,630
    
    
    
    1,560,194SMS revenue
    
    
    
    
    
    
    298,232
    
    
    
    1,339,321Brokerage service revenue
    
    
    
    
    
    
    
    
    
    
    80,896Others
    
    
    674,460
    
    
    
    416,386
    
    
    
    210,620$
    7,482,166
    
    
    $
    7,128,078
    
    
    $
    25,903,074
 Revenue recognition
    Cost of revenues
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Rent.
 Cost of raw data.
 
    
    if we enter into additional commercial agreements for purchasing data from new sources
or if we obtain different or additional data from existing sources or
    
    due to rate increases we may experience in the future upon renewal of our existing
agreements.
 Salary and compensation.
 Depreciation.
 Operating expenses
  
    
    salary and compensation for our employees, particularly our sales and marketing
personnel and our management team;
    
    stock- based compensation expenses for the grant of the performance-based restricted
stock and for new grants issued in 2007;
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
    
    professional services and other related costs associated with being publicly listed in
the U.S; and
    
    expansion in operating scale associated with the acquisition of CFO Stockstar, CFO
Genius and Daily Growth Securities.
  General and administrative expenses.
 Product development expenses.
 Sales and marketing expenses.
 Stock option plan and option agreements
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Critical accounting policies
  61




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Income taxes.
 Stock-based compensation.
  Cost method investment.
 Goodwill.
  62




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Impairment of long-lived assets.
 Results of operations
  For the year ended December 31,(in thousands of U.S. dollars, except as % of net revenues)(1)
    
    2005
    
    2006
    
    2007Consolidated statement of operations and comprehensive income
(loss) data:Gross revenues(2)
    
    $
    7,627
    
    
    
    101.9
    %
    
    $
    7,337
    
    
    
    102.9
    %
    
    $
    26,570
    
    
    
    102.6
    %Business tax
    
    
    (145
    )
    
    
    (1.9
    )
    
    
    (209
    )
    
    
    (2.9
    )
    
    
    (667
    )
    
    
    (2.6
    )Net revenues
    
    
    7,482
    
    
    
    100
    %
    
    
    7,128
    
    
    
    100
    %
    
    
    25,903
    
    
    
    100
    %Cost of revenues
    
    
    (482
    )
    
    
    (6.4
    )
    
    
    (1,468
    )
    
    
    (20.6
    )
    
    
    (4,427
    )
    
    
    (17.1
    )Gross profit
    
    
    7,000
    
    
    
    93.6
    
    
    
    5,660
    
    
    
    79.4
    
    
    
    21,476
    
    
    
    82.9Operating expenses:General and administrative
    
    
    (1,740
    )
    
    
    (23.3
    )
    
    
    (2,956
    )
    
    
    (41.5
    )
    
    
    (7,784
    )
    
    
    (30.1
    )Product development
    
    
    (236
    )
    
    
    (3.2
    )
    
    
    (742
    )
    
    
    (10.4
    )
    
    
    (2,269
    )
    
    
    (8.8
    )Sales and marketing
    
    
    (1,795
    )
    
    
    (24.0
    )
    
    
    (2,666
    )
    
    
    (37.4
    )
    
    
    (6,924
    )
    
    
    (26.7
    )Total operating expenses
    
    
    (3,771
    )
    
    
    (50.5
    )
    
    
    (6,364
    )
    
    
    (89.3
    )
    
    
    (16,977
    )
    
    
    (65.5
    )Subsidy income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    0.5Income from operations
    
    
    3,229
    
    
    
    43.2
    
    
    
    (704
    )
    
    
    (9.9
    )
    
    
    4,635
    
    
    
    17.9Interest income
    
    
    1,486
    
    
    
    19.9
    
    
    
    1,003
    
    
    
    14.1
    
    
    
    1,105
    
    
    
    4.3Exchange gain (net)
    
    
    366
    
    
    
    4.9
    
    
    
    267
    
    
    
    3.7
    
    
    
    424
    
    
    
    1.6Other expense, net
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    1.6
    
    
    
    9
    
    
    
    0.03Loss from impairment of cost method investment
    
    
    
    
    
    
    
    
    
    
    (1,322
    )
    
    
    (18.5
    )
    
    
    (11,127
    )
    
    
    (43.0
    )Income before income taxes benefit (provision)
    
    
    5,081
    
    
    
    67.9
    
    
    
    (641
    )
    
    
    (9.0
    )
    
    
    (4,954
    )
    
    
    (19.1
    )Minority interests in net income of consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    0.06Income tax benefit (provision)
    
    
    (457
    )
    
    
    (6.1
    
    
    
    41
    
    
    
    (0.58
    )
    
    
    809
    
    
    
    3.1Net income (loss)
    
    $
    4,624
    
    
    
    61.8
    %
    
    $
    (600
    )
    
    
    (8.4
    %)
    
    $
    (4,130
    )
    
    
    (15.9
    %)
 
 (1)
    
    For the results of operations for a specified period, all translations from Renminbi to U.S. dollars were calculated at the average exchange rate for that period. For the years
ended 63




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December 31, 2005, 2006 and 2007, all translations from Renminbi to U.S. dollars were calculated at RMB8.1472, RMB7.9693 and RMB7.6072 per US$1.00, respectively.(2)
    
    For subscriptions provided to individual investors, we receive subscription fees at the beginning of the subscribers subscription periods. Revenues from the
subscription fees are deferred and recognized ratably over the subscription period, typically twelve months. Year ended December 31, 2007 compared to year ended December 31, 2006
 Revenues
     Cost of revenues
  Gross profit
  Operating expenses
  64




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##### Table of Contents



General and administrative.
 Product development.
 Sales and marketing.
 Income/(Loss) from operations
  Interest income
  Loss from impairment of cost method investment
    65




---



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Income tax benefit
  Net income/(loss)
  Year ended December 31, 2006 compared to year ended December 31, 2005
 Revenues
    Cost of revenues
 66




---



##### Table of Contents



Gross profit
  Operating expenses
  General and administrative.
 Product development.
 Sales and marketing.
 Income/(Loss) from operations
  Interest income
 67




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##### Table of Contents



Loss from impairment of cost method investment
   Income tax benefit
  Net income/(loss)
  B. Liquidity and capital resources.
 Cash flows and working capital
   For the year ended December 31(in thousands of U.S. dollars)
    
    2005
    
    2006
    
    2007Net cash provided by operating activities
    
    $
    3,059
    
    
    $
    5,892
    
    
    $
    28,426Net cash used in investing activities
    
    
    (15,235
    )
    
    
    (8,202
    )
    
    
    (4,830
    )
 68




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##### Table of Contents



For the year ended December 31(in thousands of U.S. dollars)
    
    2005
    
    2006
    
    2007Net cash provided by (used in) financing activities
    
    
    (12,923
    )
    
    
    (76
    )
    
    
    3,226Net increase (decrease) in cash and cash equivalents
    
    
    (24,428
    )
    
    
    (1,213
    )
    
    
    29,773Cash and cash equivalents at beginning of year
    
    
    70,596
    
    
    
    46,168
    
    
    
    44,956Cash and cash equivalents at end of year
    
    $
    46,168
    
    
    $
    44,956
    
    
    $
    74,729
    Capital resources
    Restricted net assets
  69




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##### Table of Contents



C. Research and development.
  
    
    increase the breadth of our service offerings through the addition of new features and
functions to our service packages;
    
    enhance our subscribers experience by improving the quality of our research tools and
website; and
    
    develop additional research tools, features and content specifically targeting the
high-end subscribers.
 D. Trend information.
  E. Off-balance sheet arrangements.
  F. Tabular disclosure of contractual obligations.
  Office Premises
    
    Data Purchase
    
    Total(in U.S. dollars)Less than 1 year
    
    
    1,521,127
    
    
    
    486,673
    
    
    
    2,007,8001  3 years
    
    
    2,845,844
    
    
    
    21,934
    
    
    
    2,867,7783  5 years
    
    
    22,128
    
    
    
    
    
    
    
    22,128
  G.
Quantitative and qualitative disclosures about market risk.
 70




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##### Table of Contents



Interest rate risk
  Foreign currency risk
   Recent accounting standards.
    71




---



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72




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##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and senior management.
  Name
    
    Age
    
    PositionZhiwei Zhao
    
    
    45
    
    
    Chief Executive Officer and a member of the Board of DirectorsHugo Shong
    
    
    52
    
    
    Chairman of the Board of DirectorsKheng Nam Lee(1)
    
    
    60
    
    
    DirectorLing Wang(1)(2)(3)
    
    
    45
    
    
    DirectorFansheng Guo(1)(2)(3)
    
    
    52
    
    
    DirectorJun (Jeff) Wang
    
    
    37
    
    
    Chief Financial OfficerCaogang Li
    
    
    42
    
    
    Chief Operating Officer
 
 (1)
    
    Member, audit committee(2)
    
    Member, compensation committee(3)
    
    Member, nominations committee   Biographical Information
 Hugo Shong
 Zhiwei Zhao
 73




---



##### Table of Contents



Kheng Nam Lee
 Ling Wang
 Fansheng Guo
 Jun (Jeff) Wang
 Dr. Caogang Li
 B. Compensation of directors and executive officers.
  74




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##### Table of Contents



Directors and officers liability insurance
  Employees stock option plan
   75




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##### Table of Contents



Number ofordinary Shares tobe issued upon
    
    Exercise price perexercise of options
    
    ordinary share
    
    Date of grant
    
    Date of expirationZhiwei Zhao
    
    
    400,000
    
    
    $
    1.120
    
    
    November 15, 2005
    
    November 15, 2015400,000
    
    
    $
    1.070
    
    
    July 5, 2006
    
    July 5, 2016800,000
    
    
    $
    0.960
    
    
    January 18, 2007
    
    January 17, 2017Hugo Shong
    
    
    *
    
    
    $
    0.160
    
    
    January 5, 2004
    
    March 5, 2009*
    
    
    $
    1.040
    
    
    June 15, 2004
    
    March 5, 2009*
    
    
    $
    1.314
    
    
    February 18, 2005
    
    February 18, 2015*
    
    
    $
    0.960
    
    
    January 18, 2007
    
    January 17, 2017Kheng Nam Lee
    
    
    *
    
    
    $
    0.160
    
    
    February 18, 2004
    
    March 5, 2009*
    
    
    $
    1.040
    
    
    June 15, 2004
    
    March 5, 2009*
    
    
    $
    1.314
    
    
    February 18, 2005
    
    February 18, 2015*
    
    
    $
    0.960
    
    
    January 18, 2007
    
    January 17, 2017Fansheng Guo
    
    
    *
    
    
    $
    0.160
    
    
    January 5, 2004
    
    March 5, 2009*
    
    
    $
    1.040
    
    
    June 15, 2004
    
    March 5, 2009*
    
    
    $
    1.314
    
    
    February 18, 2005
    
    February 18, 2015*
    
    
    $
    0.960
    
    
    January 18, 2007
    
    January 17, 2017Ling Wang
    
    
    *
    
    
    $
    0.160
    
    
    January 5, 2004
    
    March 5, 2009*
    
    
    $
    1.040
    
    
    June 15, 2004
    
    March 5, 2009*
    
    
    $
    1.314
    
    
    February 18, 2005
    
    February 18, 2015*
    
    
    $
    0.960
    
    
    January 18, 2007
    
    January 17, 2017Jun (Jeff) Wang
    
    
    *
    
    
    $
    1.070
    
    
    July 5, 2006
    
    July 5, 2016*
    
    
    $
    0.960
    
    
    January 18, 2007
    
    January 17, 2017Caogang Li
    
    
    *
    
    
    $
    1.158
    
    
    November 30, 2005
    
    November 30, 2015*
    
    
    $
    0.96
    
    
    January 18, 2007
    
    January 17, 2017
 
 *
    
    Upon exercise of all options granted, would beneficially own less than
1% of our outstanding ordinary shares. Equity Incentive Plan
  76




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##### Table of Contents



Name
    
    Number
    
    PercentSelected EmployeesZhiwei Zhao
    
    
    8,958,493
    
    
    
    8.16
    %Jun (Jeff) Wang
    
    
    *
    
    
    
    *Caogang Li
    
    
    *
    
    
    
    *All executive officers as a group (3 persons)
    
    
    10,558,493
    
    
    
    9.62
    %
 C. Board practices .
  Board committees
  Audit committee.
 
    
    recommending to our shareholders, if appropriate, the annual re-appointment of our
independent registered public accounting firm and pre-approving all auditing and
non-auditing service fees permitted to be performed by the independent registered public
accounting firm;
    
    annually reviewing an independent registered public accounting firms report describing
the independent registered public accounting firms internal quality-control procedures,
any material issues raised by the most recent internal quality control review, or peer
review, of the independent registered public accounting firm and all relationships between
the independent registered public accounting firm and our company;
    
    setting clear hiring policies for employees or former employees of the independent
registered public accounting firm;
    
    reviewing with the independent registered public accounting firm any audit problems or
difficulties and managements response;
 77




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##### Table of Contents




    
    reviewing and approving all proposed related-party transactions, as defined in Item 404
of Regulation S-K under the U.S. securities laws;
    
    discussing the annual audited financial statements with management and the independent
registered public accounting firm;
    
    discussing with management and the independent registered public accounting firm major
issues regarding accounting principles and financial statement presentations; reviewing
reports prepared by management or the independent auditors relating to significant
financial reporting issues and judgments;
    
    reviewing reports prepared by management or the independent registered public
accounting firm relating to significant financial reporting issues and judgments;
    
    discussing earnings press releases, as well as financial information and earnings
guidance provided to analysts and rating agencies;
    
    reviewing with management and the independent registered public accounting firm the
effect of regulatory and accounting initiatives, as well as off-balance sheet structures
on our financial statements;
    
    discussing policies with respect to risk assessment and risk management;
    
    reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted in light of material control deficiencies;
    
    timely reviewing annual reports from the independent registered public accounting firm
regarding all critical accounting policies and practices to be adopted by our company, all
alternative treatments of financial information within U.S. GAAP that have been discussed
with management and all other material written communications between the independent
registered public accounting firm and management;
    
    establishing procedures for the receipt, retention and treatment of complaints received
from our employees regarding accounting, internal accounting controls or auditing matters
and the confidential, anonymous submission by our employees of concerns regarding
questionable accounting or auditing matters;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    such other matters that are specifically delegated to our audit committee by our board
of directors from time to time;
    
    meeting separately, periodically, with management and the independent registered public
accounting firm; and
    
    reporting regularly to the full board of directors.
 Compensation committee.
 
    
    determining and recommending the compensation of our senior management;
 78




---



##### Table of Contents




    
    reviewing and making recommendations to our board of directors regarding our
compensation policies and forms of compensation provided to our directors and officers;
    
    reviewing and determining bonuses for our officers and other employees;
    
    reviewing and determining stock-based compensation for our directors, officers,
employees and consultants;
    
    administering our equity incentive plans in accordance with the terms thereof; and
    
    such other matters that are specifically delegated to the compensation committee by our
board of directors from time to time.
 Nominations committee.
 Corporate governance
   Duties of directors
   
    
    convening shareholders meetings and reporting its work to shareholders at such
meetings;
    
    implementing shareholders resolutions;
    
    determining our business plans and investment proposals;
    
    formulating our profit distribution plans and loss recovery plans;
    
    determining our debt and finance policies and recommending proposals for the increase
or decrease in our share capital and the issuance of debentures;
    
    formulating our major acquisition and disposition plans, and plans for consolidation,
division or dissolution;
 79




---



##### Table of Contents




    
    proposing amendments to our articles of association; and
    
    exercising any other powers conferred at shareholders meetings or under our memorandum
and articles of association.
 Terms of directors and executive officers
  D. Employees .
   E. Share ownership.
   
    
    each person known to us to own beneficially more than 5% of our ordinary shares; and
    
    each of our directors and executive officers who beneficially own any of our ordinary shares.
   Name
    
    Number
    
    Percent5% ShareholderIDG Technology Venture Investment, Inc.(1)
    
    
    20,580,652
    
    
    
    18.75
    %IDG Technology Venture Investments, LP (2)
    
    
    6,723,115
    
    
    
    6.13
    %
 80




---



##### Table of Contents



Name
    
    Number
    
    PercentVertex Technology Fund (III) Ltd. (3)
    
    
    11,595,569
    
    
    
    10.57
    %Jianping Lu (4)
    
    
    7,156,121
    
    
    
    6.52
    %Ling Zhang (5)
    
    
    8,746,370
    
    
    
    7.97
    %C&F International Holdings Limited (6)
    
    
    10,558,493
    
    
    
    9.62
    %Directors and executive officersHugo Shong
    
    
    *
    
    
    
    *Kheng Nam Lee
    
    
    *
    
    
    
    *Ling Wang
    
    
    *
    
    
    
    *Fansheng Guo
    
    
    *
    
    
    
    *Zhiwei Zhao
    
    
    *
    
    
    
    *Jun (Jeff) Wang
    
    
    *
    
    
    
    *Caogang Li
    
    
    *
    
    
    
    *All current directors and executive officers as
a group (7 persons)
    
    
    2,815,200
    
    
    
    2.56
    %
 
 *
    
    Upon exercise of all options currently exercisable
or vesting within 60 days of the date of this
annual report, would beneficially own less than 1%
of our ordinary shares.(1)
    
    Includes 20,580,652 ordinary shares held by IDG
Technology Venture Investment, Inc. IDG Technology
Venture Investment, Inc. is the limited partner of
IDG Technology Venture Investments, LP and does not
control IDG Technology Venture Investments, LP. IDG
Technology Venture Investment, Inc., a
Massachusetts corporation, is wholly owned by
International Data Group Inc., a Massachusetts
corporation, which is controlled by Patrick
McGovern, the majority shareholder, founder and
chairman of International Data Group Inc. IDG
Technology Venture Investment, Inc. disclaims
beneficial ownership of all of the ordinary shares
owned by IDG Technology Venture Investments, LP.
The registered address of IDG Technology Venture
Investment, Inc. is 5 Speen Street, Framingham, MA
01701, U.S.A.(2)
    
    Includes 6,723,115 ordinary shares held by IDG
Technology Venture Investments, LP. The general
partner of IDG Technology Venture Investments, LP
is IDG Technology Venture Investments, LLC. Messrs.
Patrick McGovern and Quan Zhou are managing members
of IDG Technology Venture Investments, LLC, both of
whom disclaim beneficial ownership of our shares
held by IDG Technology Venture Investments, LLC.
IDG Technology Venture Investment, Inc. is a
limited partner of IDG Technology Venture
Investments, LP, and does not control IDG
Technology Venture Investments, LP. IDG Technology
Venture Investments, LP disclaims beneficial
ownership of all of the ordinary shares owned by
IDG Technology Venture Investment, Inc. The
registered address of IDG Technology Venture
Investments, LP is Corporation Service Company,
1013 Centre Road, Wilmington, County of New Castle,
Delaware 19805-1297, U.S.A.(3)
    
    Includes 11,595,569 ordinary shares held by Vertex
Technology Fund (III) Ltd as of 31 March 2008 in
the form of 2,319,113 ADS and 4 ordinary shares.
Vertex Management (II) Pte Ltd is the fund manager
of Vertex Technology Fund (III) Ltd, and may be
deemed to have power to vote and dispose of the
shares held of record by Vertex Technology Fund
(III) Ltd. Vertex Venture Holdings Ltd, as the sole
shareholder of Vertex Technology Fund (III) Ltd,
and as the sole shareholder of Vickers Capital
Limited, which is the sole shareholder of Vertex
Management (II) Pte Ltd, may also be deemed to have
the power to vote and dispose of these shares. The
address of Vertex Technology Fund (III) Ltd is 51
Cuppage Road, #10-03 Starhub Centre, Singapore
229469.(4)
    
    Includes (i) 4,028,156 ordinary shares held by Cast
Technology, Inc.; and (ii) 3,127,965 ordinary
shares held by Fanasia Capital Limited. Both Cast
Technology, Inc. and Fanasia Capital Limited are
held 45% and 55% by Jianping Lu and Ling Zhang,
respectively.(5)
    
    Includes (i)4,923,302 ordinary shares held by Cast
Technology, Inc.; and (ii) 3,823,068 ordinary
shares held by Fanasia 81




---



##### Table of Contents



Capital Limited. Both Cast
Technology, Inc. and Fanasia Capital Limited are
held 45% and 55% by Jianping Lu and Ling Zhang,
respectively.(6)
    
    Includes 10,558,493 ordinary shares held by C&F
International Holdings Limited, a company
incorporated in British Virgin Islands. C&F
International Holdings Limited holds the ordinary
shares on behalf of and exclusively for the benefit
of the group of employees eligible for the 2007
Equity Incentive Plan. C&F International Holdings
Limited is 100% owned by C&F Global Limited, a
British Virgin Islands Company, which is in turn
owned by the selected employees.  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major shareholders.
  B. Related party transactions .
 CFO Beijing/CFO Fuhua arrangements
   Leasing of equipment
 Equipment Leasing Agreement, dated May 27, 2004, between CFO Beijing and CFO Fuhua.
  Provision of services
 82




---



##### Table of Contents



Technical Support Agreement, dated May 27, 2004, between CFO Beijing and CFO Fuhua.
  Amended and Restated Strategic Consulting Service Agreement, dated May 27, 2004, between CFO
Beijing and CFO Fuhua.
  CFO Software/CFO Glory and CFO Software/CFO Premium arrangements
   Strategic Consulting Service Agreement, dated August 21, 2007, between CFO Software and CFO
Premium.
  Technical Support Agreement, dated August 21, 2007, between CFO Software and CFO Premium.
  83




---



##### Table of Contents



Operation Agreement, dated August 21, 2007, between CFO Software and CFO Premium.
   Loans to Zhiwei Zhao, Wu Chen and Jun Wang
   84




---



##### Table of Contents



Loans to Wei Xiong and Zhenfei Fan
  85




---



##### Table of Contents



Loans to CFO Beijing and CFO Software
  Shareholder rights and corporate governance
 Transfer of ownership when permitted by law
    86




---



##### Table of Contents



Voting arrangement
    Share Pledge Agreement
  87




---



##### Table of Contents



Financing support
  Indemnifications
  2007 Equity Incentive Plan
  Other related party transactions
 Shareholders Agreement
  88




---



##### Table of Contents




    
    the fifth anniversary of the consummation of our initial public offering;
    
    upon such holder holding less than 1% of our outstanding ordinary shares after our
initial public offering; and
    
    upon such holder becoming eligible to sell all of such holders registrable securities
pursuant to Rule 144 under the Securities Act within any three-month period without volume
limitations, under Rule 144(k), or under any comparable securities law of a jurisdiction
other than the United States for sale of registrable securities in such jurisdiction.
 C. Interests of experts and counsel.
  
 ITEM 8. FINANCIAL INFORMATION
 A. Consolidated financial statements and other financial information.
  Legal Proceedings
  89




---



##### Table of Contents



Dividend Policy
  B. Significant changes since December 31, 2007 .
  
 ITEM 9. THE OFFER AND LISTING
 A. Offering and listing details.
   Sales PriceHigh
    
    LowYearly highs and lowsYear 2004 (from October 15, 2004)
    
    
    15.99
    
    
    
    8.30Year 2005
    
    
    11.14
    
    
    
    5.22Year 2006
    
    
    9.68
    
    
    
    3.95Year 2007
    
    
    47.68
    
    
    
    4.53Quarterly highs and lowsFirst Quarter 2006
    
    
    9.68
    
    
    
    5.66Second Quarter 2006
    
    
    7.37
    
    
    
    4.74Third Quarter 2006
    
    
    6.60
    
    
    
    4.95Fourth Quarter 2006
    
    
    5.60
    
    
    
    3.95First Quarter 2007
    
    
    7.27
    
    
    
    4.53Second Quarter 2007
    
    
    10.18
    
    
    
    6.04
 90




---



##### Table of Contents



Sales PriceHigh
    
    LowThird Quarter 2007
    
    
    44.48
    
    
    
    8.17Fourth Quarter 2007
    
    
    47.68
    
    
    
    16.55First Quarter 2008
    
    
    22.43
    
    
    
    10.02Monthly highs and lowsNovember 2007
    
    
    39.99
    
    
    
    16.55December 2007
    
    
    27.74
    
    
    
    19.3January 2008
    
    
    22.43
    
    
    
    10.02February 2008
    
    
    21.85
    
    
    
    14.6March 2008
    
    
    21.35
    
    
    
    12.8
 B. Plan of distribution.
  C. Markets.
  D. Selling shareholders.
  E. Dilution.
  F. Expenses of the issue.
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share capital.
  B. Memorandum and articles of association.
  C. Material contracts.
  D. Exchange controls.
 91




---



##### Table of Contents



E. Taxation.
 Hong Kong taxation
 Profits tax.
  92




---



##### Table of Contents



Estate duty.
 Stamp duty.
 United States federal income taxation
  
    
    dealers in securities or currencies;
    
    traders in securities that elect to use a mark-to-market method of accounting for
securities holdings;
    
    banks or other financial institutions;
    
    insurance companies;
 
 93




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##### Table of Contents




    
    tax-exempt organizations;
    
    partnerships and other entities treated as partnerships for U.S. federal income tax
purposes or persons holding ADSs through any such entities;
    
    persons that hold ADSs as part of a hedge, straddle, constructive sale, conversion
transaction or other integrated investment;
    
    U.S. Holders (as defined below) whose functional currency for tax purposes is not the
U.S. dollar;
    
    persons liable for alternative minimum tax; or
    
    persons who actually or constructively own 10% or more of the total combined voting
power of all classes of our shares (including ADSs) entitled to vote.
    
    
    a citizen or resident of the United States for U.S. federal income tax purposes;
    
    a corporation, or other entity taxable as a corporation, that was created or
organized in or under the laws of the United States or any political
subdivision thereof;
    
    an estate the income of which is subject to U.S. federal income tax regardless
of its source; or
    
    a trust if (a) a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have the
authority to control all substantial decisions of the trust, or (b) the trust
has a valid election in effect to be treated as a U.S. person.
   U.S. Holders
 94




---



##### Table of Contents



Dividends on ADSs
    Sales and other dispositions of ADSs
  Passive Foreign Investment Company
    95




---



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96




---



##### Table of Contents



Non-U.S. Holders
  
    
    that gain is effectively connected with the conduct of a U.S. trade or
business and, if an applicable income tax treaty so requires as a
condition for you to be subject to U.S. federal income tax with
respect to income from your ADSs, such gain is attributable to a
permanent establishment that you maintain in the United States; or
    
    you are a nonresident alien individual and are present in the United
States for at least 183 days in the taxable year of the sale or other
disposition and either (1) your gain is attributable to an office or
other fixed place of business that you maintain in the United States
or (2) you have a tax home in the United States.
  U.S. information reporting and backup withholding rules
   F. Dividends and paying agents.
 97




---



##### Table of Contents



G. Statement by experts.
  H. Documents on display.
  www.sec.gov
   I. Subsidiaries information.
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  98




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##### Table of Contents



ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
     2007(USD)Total assets
    
    
    8,109,972Net assets
    
    
    3,999,090Revenue
    
    
    80,896Loss for the financial year
    
    
    (103,180
    )
 99




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Report of the Independent Registered Public Accounting Firm
       100




---



##### Table of Contents



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
 ITEM 16B. CODE OF ETHICS
  www.chinafinanceonline.com/investor/governance.asp
 
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  101




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For the Year Ended December 31,2007
    
    2006
    
    2005Audit Fees(1)
    
    
    
    
    
    US$
    635,000
    
    
    
    
    
    
    US$
    257,000
    
    
    
    
    
    
    US$
    192,500Tax Fees(2)
    
    
    
    
    
    
    22,278
 
 (1)
    
    Audit Fees means the aggregate fees in each of the fiscal years listed for
professional services rendered by Deloitte Touche Tohmatsu CPA Ltd. for the audit of our annual
financial statements, review of interim financial statements and attestation services that are
provided in connection with statutory and regulatory filings or engagements.(2)
    
    Tax Fees means the aggregate fees billed in each of the fiscal years listed for
professional tax services rendered by Deloitte Touche Tohmatsu CPA Ltd. 
 ITEM 16D. EXEMPTION FROM THE LISTING STANDARD FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 PART III
 
 ITEM 17. FINANCIAL STATEMENT
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
 Index to exhibits
 ExhibitNumber
    
    Description1.1
    
    Amended and Restated Memorandum and Articles of
Association of China Finance Online Co. Limited
(incorporated by reference to Exhibit 3.1 from our
Registration Statement on Form F-1 (File No.
333-119166) filed with the
 102




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##### Table of Contents



ExhibitNumber
    
    DescriptionSecurities and Exchange
Commission on October 4, 2004)2.1
    
    Specimen ordinary share certificate (incorporated
by reference to Exhibit 4.1 from our Registration
Statement on Form F-1 (File No. 333-119166) filed
with the Securities and Exchange Commission on
September 21, 2004)2.2
    
    Specimen American depositary receipt of China
Finance Online Co. Limited (Incorporated by
reference to the Registration Statement on Form F-6
(File No. 333-119530) filed with the Securities and
Exchange Commission with respect to American
depositary shares representing ordinary shares on
October 5, 20042.3
    
    Shareholders Agreement of China Finance Online Co.
Limited dated June 2000 among China Finance Online
Co., Ltd. and certain of its shareholders
(incorporated by reference to Exhibit 4.2 from our
Registration Statement on Form F-1 (File No.
333-119166) filed with the Securities and Exchange
Commission on September 21, 2004)4.1
    
    2004 Incentive Stock Option Plan and form of option
agreement (incorporated by reference to Exhibit 4.1
from our 2006 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and
Exchange Commission on May 29, 2007)4.2
    
    Restricted Stock Issuance and Allocation
Agreement-2007 Equity Incentive Plan (incorporated
by reference to Exhibit 99.1 on Form 6-K (File No.
000-50975) filed with the Securities and Exchange
Commission on August 24, 20074.3
    
    Form of Option Agreement with outside consultants
and strategic advisors (incorporated by reference
to Exhibit 10.2 from our Registration Statement on
Form F-1 (File No. 333-119166) filed with the
Securities and Exchange Commission on September 21,
2004)4.4
    
    Purchase Option and Cooperation Agreement dated May
27, 2004 among China Finance Online Co. Limited,
Jun Ning, Wu Chen and CFO Fuhua Innovation
Technology Development Co., Ltd. (incorporated by
reference to Exhibit 10.3 from our Registration
Statement on Form F-1 (File No. 333-119166) filed
with the Securities and Exchange Commission on
September 21, 2004)4.5
    
    Share Pledge Agreement dated May 27, 2004 among Jun
Ning, Wu Chen and China Finance Online (Beijing)
Co., Ltd. (incorporated by reference to Exhibit
10.4 from our Registration Statement on Form F-1
(File No. 333-119166) filed with the Securities and
Exchange Commission on September 21, 2004)4.6
    
    Proxy from Wu Chen to Jian Feng dated May 27, 2004
(incorporated by reference to Exhibit 10.6 from our
Registration Statement on Form F-1 (File No.
333-119166) filed with the Securities and Exchange
Commission on September 21, 2004)4.7
    
    Framework Agreement on Exercising Purchase Option
dated November 20, 2006 by and among Jun Ning, Wu
Chen, Zhiwei Zhao, CFO Fuhua Innovation Technology
Development Co., Ltd. and China Finance Online
(Beijing) Co., Ltd. (incorporated by reference to
Exhibit 4.7 from our 2006 Annual Report on Form
20-F (File No.000-50975 ) filed with the Securities
and Exchange Commission on May 29, 2007)
 103




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##### Table of Contents



ExhibitNumber
    
    Description4.8
    
    Share Transfer Contract (related to shares of
Beijing Fuhua Innovation Technology Development
Co., Ltd.) dated November 20, 2006 by and between
Jun Ning and Zhiwei Zhao (incorporated by reference
to Exhibit 4.8 from our 2006 Annual Report on Form
20-F (File No.000-50975 ) filed with the Securities
and Exchange Commission on May 29, 2007)4.9
    
    Loan Agreement dated November 20, 2006 by and
between China Finance Online Co. Limited by and
Zhiwei Zhao (incorporated by reference to Exhibit
4.9 from our 2006 Annual Report on Form 20-F (File
No.000-50975 ) filed with the Securities and
Exchange Commission on May 29, 2007)4.10
    
    Purchase Option and Cooperation Agreement dated
November 20, 2006 among China Finance Online Co.
Limited, Zhiwei Zhao, Wu Chen, Fuhua Innovation
Technology Development Co., Ltd. and China Finance
Online (Beijing) Co., Ltd. (incorporated by
reference to Exhibit 4.10 from our 2006 Annual
Report on Form 20-F (File No.000-50975 ) filed with
the Securities and Exchange Commission on May 29,
2007)4.11
    
    Share Pledge Agreement dated November 20, 2006
among Zhiwei Zhao, Wu Chen, Fuhua Innovation
Technology Development Co., Ltd. and China Finance
Online (Beijing) Co., Ltd. (incorporated by
reference to Exhibit 4.11 from our 2006 Annual
Report on Form 20-F (File No.000-50975 ) filed with
the Securities and Exchange Commission on May 29,
2007)4.12
    
    Equipment Lease Agreement between China Finance
Online (Beijing) Co., Ltd. and Fuhua Innovative
Technology Development Co., Ltd. dated May 27, 2004
(incorporated by reference to Exhibit 10.7 from our
Registration Statement on Form F-1 (File No.
333-119166) filed with the Securities and Exchange
Commission on September 21, 2004)4.13
    
    Technical Support Agreement between China Finance
Online (Beijing) Co., Ltd. and Fuhua Innovative
Technology Development Co., Ltd. dated May 27, 2004
(incorporated by reference to Exhibit 10.8 from our
Registration Statement on Form F-1 (File No.
333-119166) filed with the Securities and Exchange
Commission on September 21, 2004)4.14
    
    Amended and Restated Strategic Consulting Agreement
between China Finance Online (Beijing) Co., Ltd.
and Fuhua Innovative Technology Development Co.,
Ltd. dated May 27, 2004 (incorporated by reference
to Exhibit 10.9 from our Registration Statement on
Form F-1 (File No. 333-119166) filed with the
Securities and Exchange Commission on September 21,
2004)4.15*
    
    Framework Agreement on Exercising Purchase Option
dated October 18, 2007 by and among China Finance
Online Co. Limited, Wu Chen, Zhiwei Zhao, Jun Wang,
CFO Fuhua Innovation Technology Development Co.,
Ltd and China Finance Online (Beijing) Co., Ltd.4.16*
    
    Loan Agreement between China Finance Online Co.
Limited and Jun Wang dated October 18, 20074.17*
    
    Share Transfer Contract (related to shares of
Beijing Fuhua Innovation Technology Development
Co., Ltd.) dated October 18, 2007 by and between Wu
Chen and Jun Wang
 104




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##### Table of Contents



ExhibitNumber
    
    Description4.18*
    
    Share Pledge Agreement dated October 18, 2007 among
Zhiwei Zhao, Jun Wang, Fuhua Innovation Technology
Development Co., Ltd. and China Finance Online
(Beijing) Co., Ltd.4.19*
    
    Purchase Option and Cooperation Agreement dated
October 18, 2007 among China Finance Online Co.
Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua
Innovation Technology Development Co., Ltd.4.20*
    
    Purchase Option and Coopration Agreement dated
March 3, 2008 among China Finance Online Co.
Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua
Innovation Technology Development Co., Ltd.4.21*
    
    Capital Increase Agreement relating to CFO Fuhua
Innovation Technology Development Co., Ltd. dated
March 3, 2008 among CFO Fuhua Innovation Technology
Development Co., Ltd. , Jun Wang and Zhiwei Zhao4.22*
    
    Loan Agreement dated March 3,
2008 among China Finance Online (Beijing) Co., Ltd., Jun Wang and
Zhiwei Zhao4.23*
    
    Share Pledge Agreement dated March 3, 2008 among
Zhiwei Zhao, Jun Wang, Fuhua Innovation Technology
Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd.4.24*
    
    Loan Agreement dated
August 21, 2007 among Fortune Software (Beijing)
 Co., Ltd., Wei Xiong and
Zhenfei Fan4.25*
    
    Operation Agreement among dated
August 21, 2007 by
and between Fortune Software (Beijing) Co., Ltd.
and Beijing CFO Premium Technology Co., Ltd.4.26*
    
    Technical Support Agreement between
Fortune Software (Beijing)
 Co., Ltd. and Beijing CFO Premium
Technology Co., Ltd. dated August 21, 20074.27*
    
    Strategic Consulting and Service Agreement between
Fortune Software (Beijing) Co., Ltd. and
Beijing Premium Technology Co., Ltd. dated August
21, 20074.28*
    
    Purchase Option Agreement dated August 21, 2007
among Fortune Software (Beijing) Co. Limited, Wei Xiong,
Zhenfei Fan and Beijing Premium Technology Co.,
Ltd.4.29*
    
    Framework Agreement among Fortune
Software (Beijing)
 Co., Ltd., Wu Chen, Jun Wang and Beijing
Glory Co., Ltd. dated September 10, 20074.30*
    
    Loan Agreement dated September 1, 2007 among Fortune Software (Beijing)
 Co., Ltd., Wu Chen and
Zhiwei Zhao4.31*
    
    Share Transfer Contract (related to shares of
Beijing Glory Co., Ltd.) dated September 10, 2007
by and between Wu Chen and Jun Wang4.32*
    
    Operation Agreement among dated
September 10, 2007
by and between Fortune Software (Beijing)
Co.,Ltd. and Beijing Glory Co., Ltd.4.33*
    
    Technical Support Agreement between
Fortune Software (Beijing) Co., Ltd. and Beijing CFO Glory
Co., Ltd. dated September 10, 2007
 105




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##### Table of Contents



ExhibitNumber
    
    Description4.34*
    
    Strategic Consulting and Service Agreement between
Fortune Software (Beijing) Co., Ltd. and
Beijing Glory Co., Ltd. dated September 10, 20074.35*
    
    Purchase Option Agreement dated September 10, 2007
among China Finance Online Co. Limited, Jun Wang,
Zhiwei Zhao and Beijing Glory Co., Ltd.4.36
    
    Shanghai Stock Exchange Level-II Quotations License
Agreement dated June 15, 2006 between SSE Infonet
Ltd. and Fortune Software (Beijing) Co., Ltd.
(incorporated by reference to Exhibit 4.15 from our
2006 Annual Report on Form 20-F (File No.000-50975
) filed with the Securities and Exchange Commission
on May 29, 2007)4.37*
    
    License Agreement relating to the distribution of
TopView between Fortune Software (Beijing) Co.,
Ltd. and Shanghai Stock Exchange Information
Network Co., Ltd. dated December 26, 20074.38
    
    Shenzhen Stock Exchange Proprietary Information
License Agreement dated March 20, 2007 between
Fortune Software (Beijing) Co., Ltd. and Shenzhen
Securities Information Co., Ltd. (incorporated by
reference to Exhibit 4.16 from our 2006 Annual
Report on Form 20-F (File No.000-50975 ) filed with
the Securities and Exchange Commission on May 29,
2007)4.39
    
    Domain Name Transfer Agreement dated October 30,
2006 by and among China Finance Online Co., Ltd.,
China Finance Online (Beijing) Co., Ltd. and Being
Fuhua Innovation Technology Development Co.,
Ltd.(incorporated by reference to Exhibit 4.17 from
our 2006 Annual Report on Form 20-F (File
No.000-50975 ) filed with the Securities and
Exchange Commission on May 29, 2007)4.40
    
    Domain Name Transfer Agreement dated October 30,
2006 between Stockstar Information Technology
(Shanghai) Co., Ltd. and Shanghai Meining Computer
Software Company Limited (incorporated by reference
to Exhibit 4.18 from our 2006 Annual Report on Form
20-F (File No.000-50975 ) filed with the Securities
and Exchange Commission on May 29, 2007)4.41
    
    Lease Contract for Housing Unit of Corporate Square
dated January 19, 2006 between Fortune Software
(Beijing) Co. Ltd. and China Galaxy Securities
Company Limited (incorporated by reference to
Exhibit 4.20 from our Annual Report on Form 20-F
filed with the Securities and Exchange Commission
on May 23, 2006)4.42
    
    Lease Contract for Housing Unit of Corporate Square
dated January 19, 2006 between Beijing Fuhua
Innovation Technology Co., Ltd. and China Galaxy
Securities Company Limited (incorporated by
reference to Exhibit 4.20 from our Annual Report on
Form 20-F filed with the Securities and Exchange
Commission on May 23, 2006)4.43
    
    Lease Contract for Housing Unit of Corporate Square
dated January 19, 2006 between China Finance Online
Co., Ltd. and China Galaxy Securities Company
Limited (incorporated by reference to Exhibit 4.20
from our Annual Report on Form 20-F filed with the
Securities and Exchange Commission on May 23, 2006)
 106




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##### Table of Contents



ExhibitNumber
    
    Description4.44
    
    Lease Contract for Housing Unit of Corporate Square
dated December 29, 2006 between Beijing Fuhua
Innovation Technology Co., Ltd. and China Galaxy
Securities Company Limited (incorporated by
reference to Exhibit 4.22 from our 2006 Annual
Report on Form 20-F (File No.000-50975 ) filed with
the Securities and Exchange Commission on May 29,
2007)4.45
    
    Lease Contract for Housing Unit of Corporate Square
dated December 29, 2006 between Fortune Software
(Beijing) Co. Ltd. and China Galaxy Securities
Company Limited (incorporated by reference to
Exhibit 4.23 from our 2006 Annual Report on Form
20-F (File No.000-50975 ) filed with the Securities
and Exchange Commission on May 29, 2007)4.46*
    
    Lease Contract for Housing Unit of Corporate Square
dated August 9, 2007 between Fortune Software
(Beijing) Co. Ltd. and China Galaxy Securities
Company Limited4.47*
    
    Lease Contract for Housing Unit of Corporate Square
dated August 9, 2007 between Beijing Fuhua
Innovation Technology Co., Ltd. and China Galaxy
Securities Company Limited4.48*
    
    Lease Contract for Housing Unit of Corporate Square
dated August 1, 2007 between China Finance Online
(Beijing) Co., Ltd. and China Galaxy Securities
Company Limited4.49*
    
    Lease Contract for Housing Unit of Corporate Square
dated August 1, 2007 between Beijing Fuhua
Innovation Technology Co., Ltd. and China Galaxy
Securities Company Limited4.50*
    
    Lease Contract for Housing Unit of Corporate Square
dated August 1, 2007 between Fortune Software
(Beijing) Co. Ltd. and China Galaxy Securities
Company Limited4.51*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among William Wang, FNG
International Holdings Limited and China Finance
Online Co. Limited4.52*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among Tsang Kin-Woo, FNG
International Holdings Limited and China Finance
Online Co., Limited4.53*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among Wong Chan Miu-Wan Stella,
FNG International Holdings Limited and China
Finance Online Co. Limited4.54*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among Shun Kin Enterprises
Limited, FNG International Holdings Limited and
China Finance Online Co. Limited4.55*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among Midopa Enterprises Limited,
FNG International Holdings Limited and China
Finance Online Co. Limited
 107




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##### Table of Contents



ExhibitNumber
    
    Description4.56*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among Hung Yung, FNG
International Holdings Limited and China Finance
Online Co. Limited4.57*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among Chu Ping-Im, FNG
International Holdings Limited and China Finance
Online Co. Limited4.58*
    
    Agreement for the Sale and Purchase of Shares in
Daily Growth Investment Company Limited dated
September 7, 2007 among Eternal Growth Investment
Limited, FNG International Holdings Limited and
China Finance Online Co. Limited4.59
    
    Form of indemnification agreement for directors and
officers (incorporated by reference to Exhibit
10.18 from our Registration Statement on Form F-1
(File No. 333-119166) filed with the Securities and
Exchange Commission on September 21, 2004)4.60
    
    Labor Contract of Jeff Wang dated May 24, 2006
(incorporated by reference to Exhibit 4.25 from our
2006 Annual Report on Form 20-F (File No.000-50975
) filed with the Securities and Exchange Commission
on May 29, 2007)4.61
    
    Labor Contract of Zhao Zhiwei dated June 21, 2005
(incorporated by reference to Exhibit 4.26 from our
Annual Report on Form 20-F filed with the
Securities and Exchange Commission on May 23, 2006)4.62
    
    [Intentionally Omitted]4.63
    
    [Intentionally Omitted]4.64
    
    Form of Change in Control Agreement (incorporated
by reference to Exhibit 10.1 from our Registration
Statement on Form F-1 (File No. 333-119166) filed
with the Securities and Exchange Commission on
October 4, 2004)4.65
    
    Shanghai Meining Computer Software Company Limited
Share Transfer Agreement dated August 15, 2006
among Shanghai Kemei Taidi Telecommunication
Equipment Co., Ltd., Beijing Fuhua Innovation
Technology Development Co., Ltd., China Finance
Online (Beijing) Co., Ltd.(incorporated by
reference to Exhibit 4.30 from our 2006 Annual
Report on Form 20-F (File No.000-50975 ) filed with
the Securities and Exchange Commission on May 29,
2007)4.66
    
    Stockstar Information Technology (Shanghai) Co.,
Ltd. Share Transfer Agreement dated August 15, 2006
by and among Stockstar.com, Inc. and China Finance
Online Co., Ltd.(incorporated by reference to
Exhibit 4.31 from our 2006 Annual Report on Form
20-F (File No.000-50975 ) filed with the Securities
and Exchange Commission on May 29, 2007)4.67*
    
    Engagement Letter between China Finance Online Co.,
Ltd. and Deloitte Touche Tohmatsu CPA. Ltd dated
February 26, 20088.1*
    
    List of subsidiaries10.1*
    
    Consent of Deloitte Touche Tohmatsu CPA Ltd.
 108




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##### Table of Contents



ExhibitNumber
    
    Description12.1*
    
    CEO Certification Pursuant to Rule 13a-14(a) (17
CFR 240.13a-14(a)) (17 CFR 240.13a-14(a)) or Rule
15d-1(a) (17 CFR 240.15d-14(a))12.2*
    
    CFO Certification Pursuant to Rule 13a-14(a) (17
CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR
240.15d-14(a))13.1*
    
    CEO Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 200213.2*
    
    CFO Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 109




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 SIGNATURE
  Date: June 4, 2008
    CHINA FINANCE ONLINE CO.
LIMITED/s/ Jeff WangName:
    Jeff WangTitle:
    Chief Financial Officer 110




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 CONTENTS
    
    PAGEREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F - 2CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2007
    
    
    F - 3CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
    
    
    F - 4CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
    
    
    F - 5CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
    
    
    F - 6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    
    F - 7SCHEDULE 1
    
    
    F - 42
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 CHINA FINANCE ONLINE CO. LIMITED
      
 F-2




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 CONSOLIDATED BALANCE SHEETS
(In U.S. dollars, except share-related data)
 December 31,2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    44,955,553
    
    
    $
    74,729,033Prepaid expenses and other current assets
    
    
    927,697
    
    
    
    2,947,054Trust bank balances held on behalf of customers
    
    
    
    
    
    
    2,850,541Advances to employees
    
    
    
    
    
    
    1,672,575Accounts receivable
    
    
    477,778
    
    
    
    1,491,454Deferred tax assets
    
    
    170,478
    
    
    
    1,129,515Total current assets
    
    
    46,531,506
    
    
    
    84,820,172Property and equipment, net
    
    
    1,697,481
    
    
    
    5,454,858Acquired intangible assets, net
    
    
    2,045,224
    
    
    
    1,938,177Cost method investment
    
    
    12,606,571
    
    
    
    1,479,571Rental deposits
    
    
    86,216
    
    
    
    500,222Goodwill
    
    
    8,151,851
    
    
    
    9,651,719Other assets
    
    
    
    
    
    
    25,647Deferred tax assets, non-current
    
    
    
    
    
    
    14,382Total assets
    
    $
    71,118,849
    
    
    $
    103,884,748Liabilities and shareholders equityCurrent liabilities:Deferred revenue
    
    $
    6,418,502
    
    
    $
    20,457,316Accrued expenses and other current liabilities
    
    
    2,086,017
    
    
    
    6,950,254Amounts due to customers for the trust bank balances held on their behalf
    
    
    
    
    
    
    2,850,541Accounts payable
    
    
    10,535
    
    
    
    763,458Income taxes payable
    
    
    5,483
    
    
    
    11,968Total current liabilities
    
    
    8,520,537
    
    
    
    31,033,537Deferred revenue, non-current
    
    
    
    
    
    
    4,665,112Deferred tax liabilities, non-current
    
    
    145,533
    
    
    
    352,273Total liabilities
    
    
    8,666,070
    
    
    
    36,050,922Commitments (Note 15)Minority interests
    
    
    
    
    
    
    471,431Shareholders equity:Ordinary shares ($0.00013 par value; 500,000,000 shares authorized; shares
issued and outstanding 104,384,933 in 2006 and 109,754,433 in 2007)
    
    
    13,474
    
    
    
    14,172Additional paid-in capital
    
    
    52,555,919
    
    
    
    58,727,378Accumulated other comprehensive income
    
    
    1,634,269
    
    
    
    4,501,432Retained earnings
    
    
    8,249,117
    
    
    
    4,119,413Total shareholders equity
    
    
    62,452,779
    
    
    
    67,362,395Total liabilities, minority interests and shareholders equity
    
    $
    71,118,849
    
    
    $
    103,884,748
  F-3




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In U.S. dollars, except share-related data)
 Years ended December 31,2005
    
    
    2006
    
    
    2007Net revenues
    
    $
    7,482,166
    
    
    $
    7,128,078
    
    
    $
    25,903,074Cost of revenues (including stock-based compensation
of $740, $111,612 and $16,192, respectively)
    
    
    482,068
    
    
    
    1,467,745
    
    
    
    4,426,602Gross profit
    
    
    7,000,098
    
    
    
    5,660,333
    
    
    
    21,476,472Operating expenses:General and administrative (including stock-based
compensation of $365,949, $833,685 and $2,667,613
respectively)
    
    
    1,740,117
    
    
    
    2,955,948
    
    
    
    7,783,668Product development (including stock-based
compensation of $1,610, $131,134 and $123,461
respectively)
    
    
    236,438
    
    
    
    742,728
    
    
    
    2,268,878Sales and marketing (including stock-based compensation
of $2,482, $107,231 and $139,074, respectively)
    
    
    1,794,569
    
    
    
    2,665,847
    
    
    
    6,924,336Total operating expenses
    
    
    3,771,124
    
    
    
    6,364,523
    
    
    
    16,976,882Government subsidies
    
    
    
    
    
    
    
    
    
    
    135,834Income (loss) from operations
    
    
    3,228,974
    
    
    
    (704,190
    )
    
    
    4,635,424Interest income
    
    
    1,486,276
    
    
    
    1,002,975
    
    
    
    1,104,701Other income, net
    
    
    365,965
    
    
    
    381,875
    
    
    
    433,069Loss from impairment of cost method investment
    
    
    
    
    
    
    (1,322,000
    )
    
    
    (11,127,000
    )Income before income tax (provision) benefit
    
    
    5,081,215
    
    
    
    (641,340
    )
    
    
    (4,953,806
    )Income tax (provision) benefit
    
    
    (457,028
    )
    
    
    40,707
    
    
    
    808,625Minority interest in net loss of consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    15,477Net income (loss)
    
    $
    4,624,187
    
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )Income (loss) per shareBasic
    
    $
    0.05
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Diluted
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Weighted average shares used in calculating
net income (loss) per shareBasic
    
    
    94,341,061
    
    
    
    93,650,653
    
    
    
    94,500,529Diluted
    
    
    104,781,492
    
    
    
    93,650,653
    
    
    
    94,500,529
  F-4




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
(In U.S. dollars, except share-related data)
 AccumulatedotherAdditional
    
    
    Deferred
    
    
    comprehensive
    
    
    
    
    
    
    TotalOrdinary shares
    
    
    paid-in
    
    
    stock-based
    
    
    income
    
    
    Retained
    
    
    shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    capital
    
    
    compensation
    
    
    (loss)
    
    
    earnings
    
    
    equity
    
    
    incomeBalances as of January 1, 2005
    
    
    99,329,933
    
    
    $
    12,814
    
    
    $
    64,175,132
    
    
    $
    (325,221
    )
    
    $
    (11
    )
    
    $
    4,225,563
    
    
    $
    68,088,277Repurchase of ordinary shares
    
    
    
    
    
    
    
    
    
    
    (13,200,394
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,200,394
    )Issuance of ordinary shares to employees
    
    
    2,000,000
    
    
    
    263
    
    
    
    276,713
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    276,976Stock options issued to non-employees
    
    
    
    
    
    
    
    
    
    
    112,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,689Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    258,092
    
    
    
    
    
    
    
    
    
    
    
    258,092Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    671,133
    
    
    
    
    
    
    
    671,133
    
    
    $
    671,133Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,624,187
    
    
    
    4,624,187
    
    
    
    4,624,187Balance as of December 31, 2005
    
    
    101,329,933
    
    
    
    13,077
    
    
    
    51,364,140
    
    
    
    (67,129
    )
    
    
    671,122
    
    
    
    8,849,750
    
    
    
    60,830,960
    
    
    $
    5,295,320Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (67,129
    )
    
    
    67,129
    
    
    
    
    
    
    
    
    
    
    
    Issuance of ordinary shares for exercise of
stock option by employees
    
    
    3,000,000
    
    
    
    390
    
    
    
    66,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,843Exercise of share options by non-employees
    
    
    55,000
    
    
    
    7
    
    
    
    8,793
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,800Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,183,662
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183,662Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    963,147
    
    
    
    
    
    
    
    963,147
    
    
    $
    963,147Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600,633
    )
    
    
    (600,633
    )
    
    
    (600,633
    )Balance as of December 31, 2006
    
    
    104,384,933
    
    
    
    13,474
    
    
    
    52,555,919
    
    
    
    
    
    
    
    1,634,269
    
    
    
    8,249,117
    
    
    
    62,452,779
    
    
    $
    362,514Exercise of stock option by employees
    
    
    
    
    
    
    
    
    
    
    2,366,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,366,697Exercise of share options by non-employees
    
    
    5,369,500
    
    
    
    698
    
    
    
    858,422
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    859,120Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,946,340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,946,340Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,867,163
    
    
    
    
    
    
    
    2,867,163
    
    
    $
    2,867,163Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,129,704
    )
    
    
    (4,129,704
    )
    
    
    (4,129,704
    )Balance as of December 31, 2007
    
    
    109,754,433
    
    
    $
    14,172
    
    
    $
    58,727,378
    
    
    $
    
    
    
    $
    4,501,432
    
    
    $
    4,119,413
    
    
    $
    67,362,395
    
    
    $
    (1,262,541
    )
  F-5




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)
 Years ended December 31,2005
    
    
    2006
    
    
    2007Operating activities:Net income (loss)
    
    $
    4,624,187
    
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Stock-based compensation
    
    
    370,781
    
    
    
    1,183,662
    
    
    
    2,946,340Depreciation and amortization
    
    
    129,833
    
    
    
    301,941
    
    
    
    973,953Deferred taxes
    
    
    322,289
    
    
    
    (40,081
    )
    
    
    (737,712
    )Loss on disposal of property and equipment
    
    
    9,686
    
    
    
    
    
    
    
    84,796Loss from impairment of cost method investment
    
    
    
    
    
    
    1,322,000
    
    
    
    11,127,000Gain from disposal of cost method investment
    
    
    
    
    
    
    (116,071
    )
    
    
    Minority interest
    
    
    
    
    
    
    
    
    
    
    (15,477
    )Changes in assets and liabilities:Accounts receivable
    
    
    (110,773
    )
    
    
    122,363
    
    
    
    37,377Income taxes recoverable
    
    
    14,573
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    (799,572
    )
    
    
    334,687
    
    
    
    (1,786,912
    )Advances to employees
    
    
    
    
    
    
    
    
    
    
    (1,672,575
    )Trust bank balances held on behalf of customers
    
    
    
    
    
    
    
    
    
    
    (465,101
    )Rental deposits
    
    
    (10,657
    )
    
    
    (31,955
    )
    
    
    (403,912
    )Deferred revenue
    
    
    (1,627,937
    )
    
    
    3,840,892
    
    
    
    17,509,161Account payable
    
    
    
    
    
    
    
    
    
    
    (30,297
    )Accrued expenses and other current liabilities
    
    
    95,997
    
    
    
    (388,662
    )
    
    
    4,566,829Amounts due to customers for the trust bank balance
held on their behalf
    
    
    
    
    
    
    
    
    
    
    465,101Income taxes payable
    
    
    40,762
    
    
    
    (36,041
    )
    
    
    (43,267
    )Net cash provided by operating activities
    
    
    3,059,169
    
    
    
    5,892,102
    
    
    
    28,425,600Investing activities:Purchase of property and equipment
    
    
    (234,696
    )
    
    
    (1,042,423
    )
    
    
    (3,836,412
    )Acquisition of businesses (net of cash acquired of $828,494,
for the year ended December 31, 2006, and $2,631,008
for the year ended December 31, 2007)
    
    
    
    
    
    
    (8,346,856
    )
    
    
    (993,845
    )Proceeds from partial sale of cost method investment
    
    
    
    
    
    
    1,187,500
    
    
    
    Acquisition of cost investment
    
    
    (15,000,000
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (15,234,696
    )
    
    
    (8,201,779
    )
    
    
    (4,830,257
    )Financing activities:Proceeds from stock options exercised by employees
    
    
    276,976
    
    
    
    66,843
    
    
    
    2,366,697Proceeds from exercise of options granted to non-employee
    
    
    
    
    
    
    8,800
    
    
    
    859,120Repurchase of ordinary shares
    
    
    (13,200,394
    )
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (12,923,418
    )
    
    
    75,643
    
    
    
    3,225,817Effect of exchange rate changes
    
    
    671,133
    
    
    
    1,021,202
    
    
    
    2,952,320Net (decrease) increase in cash and cash equivalents
    
    
    (24,427,812
    )
    
    
    (1,212,832
    )
    
    
    29,773,480Cash and cash equivalents, beginning of year
    
    
    70,596,197
    
    
    
    46,168,385
    
    
    
    44,955,553Cash and cash equivalents, end of year
    
    $
    46,168,385
    
    
    
    44,955,553
    
    
    
    74,729,033Supplemental disclosure of cash flow information
Income taxes paid
    
    $
    93,977
    
    
    $
    36,089
    
    
    $
    38,761
  F-6




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 1. ORGANIZATION AND PRINCIPAL ACTIVITIES
 www.jrj.com
  Date of
    
    BeneficialPlace of
    
    incorporation or
    
    ownershipCompany name
    
    incorporation
    
    establishment
    
    interestChina Finance Online (Beijing) Co., Ltd. (CFO Beijing)
    
    Beijing, PRC
    
    Jul.9, 1998
    
    100%Fortune Software (Beijing) Co., Ltd. (CFO Software)
    
    Beijing, PRC
    
    Dec.7, 2004
    
    100%Beijing Fuhua Innovation Technology Investment Co., Ltd. (CFO Fuhua)*
    
    Beijing, PRC
    
    Dec.31, 2000
    
    100%Beijing CFO Premium Technology Co., Ltd. (CFO Premium)*
    
    Beijing, PRC
    
    Aug.31, 2007
    
    100%Beijing CFO Glory Technology Co., Ltd. (CFO Glory)*
    
    Beijing, PRC
    
    Sep.11, 2007
    
    100%Fortune (Beijing) Wisdom Technology Co., Ltd. (CFO Wisdom)
    
    Beijing, PRC
    
    Oct.16, 2007
    
    100%Fortune (Beijing) Success Technology Co., Ltd. (CFO Success)
    
    Beijing, PRC
    
    Oct.16, 2007
    
    100%Shenzhen Genius Information Technology Co., Ltd. (CFO Genius) (Note 3)
    
    Shenzhen, PRC
    
    Sep.21, 2006
    
    100%Jujin Software (Shenzhen) Co., Ltd. (CFO Jujin)
    
    Shenzhen, PRC
    
    Mar.9, 2007
    
    100%Shanghai Meining Computer Software Co., Ltd. (CFO Meining) (Note 3)
    
    Shanghai, PRC
    
    Oct.1, 2006
    
    100%Stockstar Information Technology (Shanghai) Co., Ltd. (CFO Stockstar) (Note 3)
    
    Shanghai, PRC
    
    Oct.1, 2006
    
    100%Zhengning Information & Technology (Shanghai) Co., Ltd. (CFO Zhengning)
    
    Shanghai, PRC
    
    Jan.31, 2007
    
    100%FNG International Holdings Limited (CFO FNG)
    
    BVI
    
    Jul.16, 2007
    
    100%Giant Bright International Holdings Limited (CFO Giant Bright)
    
    BVI
    
    Jul.16, 2007
    
    100%Mount First Investments Limited (CFO Mount First)
    
    BVI
    
    Jul.23, 2007
    
    100%Team Gear Limited (CFO Team Gear)
    
    HongKong, PRC
    
    Oct.22, 2007
    
    100%Kinco Limited (CFO Kinco)
    
    HongKong, PRC
    
    Oct.22, 2007
    
    100%Danford (H.K) Limited (CFO Danford)
    
    HongKong, PRC
    
    Nov.30, 2007
    
    100%Daily Growth Securities Limited (CFO Daily Growth) (Note 3)
    
    HongKong, PRC
    
    Nov.23, 2007
    
    85%
 
 *
    
    Represents variable interest entity (VIE)  F-7




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued
 CFO Fuhua
   
    
    an equipment leasing agreement, pursuant to which CFO Fuhua leases a substantial
majority of its operating assets from CFO Beijing;
    
    a technical support agreement, pursuant to which CFO Beijing provides technical
support for CFO Fuhuas operations;
    
    an amended and restated strategic consulting agreement, pursuant to which CFO
Beijing provides strategic consulting services to CFO Fuhua, including consulting
services in relation to CFO Fuhuas online advertising business; and
    
    a domain name licensing agreement, pursuant to which CFO Beijing licenses to CFO
Fuhua its domain name, www.jrj.com.cn.
    
    
    the shareholders of CFO Fuhua have granted China Finance Online or individuals
designated by China Finance Online an irrevocable proxy to exercise all their voting
rights as shareholders of CFO Fuhua, including the right to appoint directors, the
general manager and other senior management of CFO Fuhua;
 F-8




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued
 CFO Fuhua
 
    
    CFO Fuhua will not enter into any transaction that may materially affect its
assets, liabilities, equity or operations without China Finance Onlines prior written
consent;
    
    CFO Fuhua will not distribute any dividends;
    
    China Finance Online may purchase the entire equity interest in, or all the assets
of, CFO Fuhua at a price equal to the total principal amount of the loan lent by the
Company to the owners of CFO Fuhua when and if such purchase is permitted by PRC law
or the current shareholders of CFO Fuhua cease to be directors or employees of CFO
Fuhua;
    
    the shareholders of CFO Fuhua have pledged their equity interest in CFO Fuhua to
CFO Beijing to secure the payment obligations of CFO Fuhua under the equipment leasing
agreement, the technical support agreement and the amended and restated strategic
consulting agreement between CFO Beijing and CFO Fuhua; and
    
    the shareholders of CFO Fuhua will not transfer, sell, pledge, dispose of or create
any encumbrance on their equity interest in CFO Fuhua without the prior written
consent of CFO Beijing.
    F-9




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued
 CFO Premium and CFO Glory
   
    
    strategic consulting services agreement, pursuant to which the amount of the fee to
be charged is 30% of CFO Premium and CFO Glorys income before tax ;
    
    technical support services agreement, pursuant to which the amount of the fee to be
charged is 30% of CFO Premium and CFO Glorys income before tax;
    
    operating support services agreement, pursuant to which the amount of the fee to be
charged is 40% of CFO Premium and CFO Glorys income before tax;
   
    
    the shareholders of CFO Premium and CFO Glory have granted CFO Software or
individuals designated by CFO Software an irrevocable proxy to exercise all their
voting rights as shareholders of CFO Premium and CFO Glory, including the right to
appoint directors, the general manager and other senior management of CFO Premium and
CFO Glory;
    
    CFO Premium and CFO Glory will not enter into any transaction that may materially
affect its assets, liabilities, equity or operations without CFO Softwares prior
written consent;
    
    CFO Premium and CFO Glory will not distribute any dividends;
    
    CFO Premium and CFO Glory may purchase the entire equity interest in, or all the
assets of, CFO Premium and CFO Glory at a price equal to the total principal amount of
the loan lent by the Company to the owners of CFO Premium and CFO Glory when and if
such purchase is permitted by PRC law or the current shareholders of CFO Premium and
CFO Glory cease to be directors or employees of CFO Premium and CFO Glory;
 F-10




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued
 CFO Premium and CFO Glory
 
    
    the shareholders of CFO Premium and CFO Glory will not transfer, sell, pledge,
dispose of or create any encumbrance on their equity interest in CFO Premium and CFO
Glory without the prior written consent of CFO Software.
    Year ended December 31,2006
    
    
    2007CFO Fuhua
    
    
    CFO Fuhua
    
    
    CFO Premium
    
    
    CFO GloryTotal assets
    
    $
    3,294,204
    
    
    $
    3,215,556
    
    
    $
    617,495
    
    
    $
    13,838,596Total liabilities
    
    
    2,915,166
    
    
    
    3,865,930
    
    
    
    480,708
    
    
    
    13,709,484
 Year ended December 31,2005
    
    2006
    
    2007CFO Fuhua
    
    CFO Fuhua
    
    CFO Fuhua
    
    CFO Premium
    
    CFO GloryNet revenue
    
    
    1,222,747
    
    
    
    1,286,614
    
    
    
    1,022,735
    
    
    
    
    
    
    
    Net income (loss)
    
    
    435
    
    
    
    (4,999
    )
    
    
    (1,013,166
    )
    
    
    (296
    )
    
    
    (7,828
    )
 F-11




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation
  Basis of consolidation
  Cash and cash equivalents
  Trust bank balances held on behalf of customers
  Advance to employees
  Use of estimates
  F-12




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Property and equipment, net
  Technology infrastructure
    
    5 yearsComputer equipment
    
    5 yearsFurniture, fixtures and equipment
    
    5 yearsMotor vehicle
    
    5 yearsLeasehold improvements
    
    Shorter of the lease term or 5 years
 Acquired intangible assets, net
     F-13




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Impairment of long-lived assets
  Goodwill
    F-14




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Revenue recognition
     F-15




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Business taxes and value added taxes
    Government subsidies
  Deferred revenue
  Cost method investment
  F-16




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Foreign currency translation
   Foreign currency risk
  Cost of raw data
  Product development expenses
  F-17




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Advertising costs
  Income taxes
   Comprehensive income
  Fair value of financial instruments
  F-18




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Concentrations of credit risk
    Stock-based compensation
   Income (loss) per share
  F-19




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Recent accounting standards
    F-20




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued
 Recent accounting standards
   3. ACQUISITIONS
  F-21




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 3. ACQUISITIONS  continued
 Acquisition of CFO Daily Growth
  AmortizationperiodPurchase Price allocation (preliminary):Cash and cash equivalents
    
    $
    2,631,008Accounts receivable
    
    
    998,320Trust bank balance held on behalf of customers
    
    
    2,391,925Prepaid and other current assets
    
    
    55,761Property and equipment, net
    
    
    26,100Account payable
    
    
    (350,261
    )Amount due to customers for the trust bank balance
held on their behalf
    
    
    (2,391,925
    )Accrued expenses and other current liabilities
    
    
    (57,137
    )Income tax payable
    
    
    (49,225
    )Deferred tax liabilities
    
    
    (9,562
    )Minority interest
    
    
    (488,186
    )Acquired intangible asset:Stock Exchange Trading Right
    
    
    54,642
    
    
    IndefiniteGoodwill
    
    
    813,393Total
    
    
    3,624,853
  F-22




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 3. ACQUISITIONS  continued
 Acquisition of CFO Genius
  AmortizationperiodPurchase price allocation:Cash and cash equivalents
    
    $
    35,802Accounts receivable
    
    
    14,174Prepaid and other current assets
    
    
    14,023Property and equipment, net
    
    
    42,506
    
    
    3-5 yearsAcquired intangible assets:Completed technology
    
    
    332,545
    
    
    5.3 yearsTrademark
    
    
    75,866
    
    
    IndefiniteCustomer relationships
    
    
    117,592
    
    
    5.3 yearsTotal assets acquired
    
    
    632,508Deferred revenue
    
    
    (361,361
    )Accrued expenses and other current liabilities
    
    
    (231,904
    )Deferred tax liabilities related to acquired
intangible assets
    
    
    (67,520
    )Total net liabilities
    
    
    (28,277
    )Goodwill
    
    
    1,068,358Total
    
    $
    1,040,081
  F-23




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 3. ACQUISITIONS  continued
 Acquisition of CFO Meining and CFO Stockstar
  AmortizationPeriodPurchase price allocation:Cash and cash equivalents
    
    $
    792,692Accounts receivable
    
    
    432,753Prepaid expenses and other current assets
    
    
    78,298Property and equipment
    
    
    297,024Acquired intangible assets:Trademark
    
    
    652,446
    
    
    IndefiniteCompleted technology
    
    
    402,089
    
    
    5.3 yearsAgreements with mobile operators
    
    
    10,495
    
    
    3 yearsCustomer relationships
    
    
    475,426
    
    
    4.3 yearsValue-added service license
    
    
    23,392
    
    
    3.3 yearsTotal assets acquired
    
    
    3,164,615Deferred revenue
    
    
    (222,868
    )Accrued expenses and other current liabilities
    
    
    (1,702,727
    )Deferred tax liabilities related to acquired
intangible assets
    
    
    (136,710
    )Total net assets
    
    
    1,102,310Goodwill
    
    
    7,032,959Total
    
    $
    8,135,269
  F-24




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 3. ACQUISITIONS  continued
  For the years ended December 31,2005
    
    
    2006
    
    
    2007(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Revenues
    
    $
    10,915,618
    
    
    $
    10,671,796
    
    
    $
    26,930,986Net income (loss)
    
    $
    2,136,433
    
    
    $
    (2,891,544
    )
    
    $
    235,997Income per share  basic
    
    $
    0.02
    
    
    $
    (0.03
    )
    
    $
    0.00Income per share  diluted
    
    $
    0.02
    
    
    $
    (0.03
    )
    
    $
    0.00
 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
  December 31,2006
    
    
    2007VAT refund receivable
    
    $
    
    
    
    $
    844,800Advances to suppliers
    
    
    181,913
    
    
    
    809,221Prepaid capital to be injected in VIE (note 1)
    
    
    
    
    
    
    685,439Interest receivable (note 2)
    
    
    415,441
    
    
    
    216,947Other current assets
    
    
    330,343
    
    
    
    390,647$
    927,697
    
    
    $
    2,947,054
 Notes: 
 1.
    
    As of December 31, 2007, $685,439 had been held by the CEO, who is the
designated owner of CFO Fuhua, for the additional capital to be injected to CFO Fuhua.2.
    
    Interest receivable is interest earned from the Groups bank deposits. F-25




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 5. COST METHOD INVESTMENT
     6. PROPERTY AND EQUIPMENT, NET
  December 31,2006
    
    
    2007Technology infrastructure
    
    $
    1,277,972
    
    
    $
    3,360,909Computer equipment
    
    
    255,246
    
    
    
    1,036,325Furniture, fixtures and equipment
    
    
    354,488
    
    
    
    894,783Motor vehicle
    
    
    64,374
    
    
    
    129,636Leasehold improvements
    
    
    354,399
    
    
    
    1,268,7312,306,479
    
    
    
    6,690,384Less: accumulated depreciation
    
    
    (608,998
    )
    
    
    (1,235,526
    )$
    1,697,481
    
    
    $
    5,454,858
  F-26




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 7. ACQUIRED INTANGIBLE ASSETS, NET
  December 31,2006
    
    
    2007Intangible assets not subject to amortization:Trademarks
    
    
    737,638
    
    
    
    789,625Stock exchange trading right
    
    
    
    
    
    
    54,498Intangible assets subject to amortization:Completed technology
    
    $
    744,042
    
    
    $
    796,480Customer relationship
    
    
    600,612
    
    
    
    642,941Value-added service license
    
    
    23,692
    
    
    
    25,361Agreement with mobile operators
    
    
    10,629
    
    
    
    11,3782,116,613
    
    
    
    2,320,283Less: Accumulated amortization
    
    
    (71,389
    )
    
    
    (382,106
    )$
    2,045,224
    
    
    $
    1,938,177
  8. GOODWILL
  Balance as of January 1, 2006
    
    
    50,534Acquisitions (Note 3):CFO Genius
    
    
    1,068,358CFO Meining and CFO Stockstar
    
    
    7,032,959Balance as of December 31, 2006
    
    
    8,151,851Acquisition of CFO Daily Growth (Note 3)
    
    
    813,393Exchange difference
    
    
    686,475Balance as of December 31, 2007
    
    
    9,651,719
 F-27




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  December 31,2006
    
    
    2007Accrued bonus
    
    $
    598,388
    
    
    $
    1,956,670Accrued professional service fees
    
    
    200,706
    
    
    
    1,188,163Withholding individual income tax-option exercise
    
    
    13,268
    
    
    
    1,139,110Value added taxes payable
    
    
    386,806
    
    
    
    936,625Other taxes payable
    
    
    56,811
    
    
    
    440,149Accrued raw data cost
    
    
    303,474
    
    
    
    425,076Accrued rental
    
    
    120,538
    
    
    
    130,820Accrued welfare benefits
    
    
    18,891
    
    
    
    81,406Others
    
    
    387,135
    
    
    
    652,235$
    2,086,017
    
    
    $
    6,950,254
 10. STOCK OPTIONS AND NONVESTED SHARES
  2004 Stock incentive plan
  F-28




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 10. STOCK OPTIONS AND NONVESTED SHARES  continued
 2004 Stock incentive plan
 Options to employees
    Years ended December 31,2006
    
    2007Weighted average risk free rate of return
    
    
    5.24
    %
    
    
    4.71
    %Weighted average expected option life
    
    5.75 years
    
    5.96 yearsVolatility rate
    
    
    58.84
    %
    
    
    59.92
    %Dividend yield
    
    
    
    
    
    
    
 Options to non-employees
  F-29




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 10. STOCK OPTIONS AND NONVESTED SHARES  continued
 2004 Stock incentive plan
 Options to non-employees
  Years ended December 31,2005
    
    
    2006
    
    
    2007Options to non-employees:Weighted average risk-free rate of return
    
    
    3.48
    %
    
    
    4.70
    %
    
    
    3.26
    %Weighted average expected option life
    
    2.14 years
    
    5.76 years
    
    3.73 yearsVolatility
    
    
    56.96
    %
    
    
    53.33
    %
    
    
    51.85
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
 Summary of stock options to employees and non-employees
  2005
    
    
    2006
    
    
    2007Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    average
    
    
    Number
    
    
    average
    
    
    Number
    
    
    averageof options
    
    
    exercise price
    
    
    of options
    
    
    exercise price
    
    
    of options
    
    
    exercise priceOutstanding at beginning of year
    
    
    12,492,988
    
    
    $
    0.18
    
    
    
    15,250,488
    
    
    $
    0.52
    
    
    
    14,843,688
    
    
    $
    0.56Granted
    
    
    5,003,000
    
    
    $
    1.29
    
    
    
    700,000
    
    
    $
    1.07
    
    
    
    3,848,000
    
    
    $
    1.07Exercised
    
    
    (1,731,500
    )
    
    $
    0.16
    
    
    
    (473,000
    )
    
    $
    0.17
    
    
    
    (7,746,280
    )
    
    $
    0.42Forfeited
    
    
    (514,000
    )
    
    $
    1.05
    
    
    
    (633,800
    )
    
    $
    0.69
    
    
    
    (387,840
    )
    
    $
    0.87Outstanding at end of year
    
    
    15,250,488
    
    
    $
    0.52
    
    
    
    14,843,688
    
    
    $
    0.56
    
    
    
    10,557,568
    
    
    $
    0.84Shares exercisable at end of year
    
    
    9,986,488
    
    
    $
    0.29
    
    
    
    11,705,508
    
    
    $
    0.43
    
    
    
    5,939,888
    
    
    $
    0.68
 F-30




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 10. STOCK OPTIONS AND NONVESTED SHARES  continued
 2004 Stock incentive plan
 Summary of stock options to employees and non-employees
  Options outstanding
    
    
    Option exercisableAggregate
    
    
    
    
    
    
    
    
    
    
    AggregateWeighted
    
    
    Weighted
    
    
    intrinsic
    
    
    
    
    
    
    Weighted
    
    
    intrinsicaverage
    
    
    average
    
    
    value as of
    
    
    
    
    
    
    average
    
    
    value as ofNumber
    
    
    remaining
    
    
    exercise
    
    
    December 31
    
    
    Number
    
    
    exercise
    
    
    December 31outstanding
    
    
    contractual life
    
    
    price
    
    
    2007
    
    
    exercisable
    
    
    price
    
    
    2007Ordinary shares$0.16
    
    
    3,373,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,069,988$1.04
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000$1.31
    
    
    1,846,580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,700,900$1.32
    
    
    27,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,000$1.12
    
    
    400,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,000$1.16
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000$1.07
    
    
    700,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000$0.96
    
    
    3,240,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $1.25
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $1.32
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $2.03
    
    
    317,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $2.19
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,557,568
    
    
    5.97 years
    
    $
    0.83
    
    
    $
    3.55
    
    
    
    5,939,888
    
    
    $
    0.68
    
    
    $
    3.70
    F-31




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 10. STOCK OPTIONS AND NONVESTED SHARES  continued
 2004 Stock incentive plan
 Summary of stock options to employees and non-employees
  Year endedDecember 31, 2005Income attributable to ordinary shareholders as reported:
    
    
    4,624,187Add: Stock-based compensation as reported
    
    
    13,589Less: Stock-based compensation determined
using the fair value method
    
    
    (1,935,649
    )Pro forma income attributable to ordinary shareholders
    
    
    2,702,127Basic net income per share:As reported
    
    $
    0.05Pro forma
    
    $
    0.04Diluted net income per share:As reported
    
    $
    0.04Pro forma
    
    $
    0.03
  Year endedOption grants
    
    December 31, 2005Weighted average risk-free rate of return
    
    
    3.37
    %Weighted average expected option life
    
    2.94 yearsVolatility
    
    
    65.08
    %Dividend yield
    
    
    
 F-32




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 10. STOCK OPTIONS AND NONVESTED SHARES  continued
 2004 Stock incentive plan
 Summary of stock options to employees and non-employees
   2007 Equity incentive plan
    Weighted-
    
    Weighted-average
    
    average
    
    Aggregateexercise
    
    grant date
    
    intrinsicNon-vested shares
    
    Shares
    
    price
    
    fair value
    
    valueAt beginning of year 2007
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    10,558,493
    
    
    
    
    
    
    
    1.84Vested
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    At end of year 2007
    
    
    10,558,493
    
    
    
    
    
    
    
    1.84
    
    
    
    46,246,199
  F-33




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 11. INCOME TAXES
    Chinese state
    
    Chinese
    
    Concession from
    
    Concession from
    
    Year ofincome
    
    local income
    
    Chinese State
    
    Chinese local
    
    commencementPRC entities
    
    tax rate
    
    tax rate
    
    unified income tax*
    
    income tax
    
    of tax holidayCFO Beijing
    
    
    24
    %
    
    
    3
    %
    
    Full exemption for the year
2003and 2004; 50% tax
relief from 2005 to 2007
    
    Full exemption from 2003
to 2007
    
    
    2003CFO Software
    
    
    15
    %
    
    
    3
    %
    
    Full exemption from
2005 to 2007
    
    Full exemption from
2005 to 2007
    
    
    2005CFO Fuhua
    
    
    30
    %
    
    
    3
    %
    
    N/A
    
    N/A
    
    
    N/ACFO Meining
    
    
    15
    %
    
    
    N/A
    
    
    15% in 2007
    
    N/A
    
    
    N/ACFO Stockstar
    
    
    15
    %
    
    
    N/A
    
    
    Same as CFO Meining
    
    N/A
    
    
    N/ACFO Zhenning
    
    
    15
    %
    
    
    N/A
    
    
    Same as CFO Meining
    
    N/A
    
    
    N/ACFO Genius
    
    
    15
    %
    
    
    N/A
    
    
    Same as CFO Meining
    
    N/A
    
    
    N/ACFO Jujin
    
    
    15
    %
    
    
    N/A
    
    
    Same as CFO Meining
    
    N/A
    
    
    N/ACFO Wisdom
    
    
    30
    %
    
    
    3
    %
    
    N/A
    
    N/A
    
    
    N/ACFO Success
    
    
    30
    %
    
    
    3
    %
    
    N/A
    
    N/A
    
    
    N/ACFO Premium
    
    
    30
    %
    
    
    3
    %
    
    N/A
    
    N/A
    
    
    N/ACFO Glory
    
    
    30
    %
    
    
    3
    %
    
    N/A
    
    N/A
    
    
    N/A
 
 *
    
    The concession from Chinese State unified income tax is shown on the
assumption that the subsidiary, VIE and the VIEs subsidiaries will not be qualified
as a high and new technology enterprise strongly supported by the state by the
authorities.   F-34




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 11. INCOME TAXES  continued
  December 31,2005
    
    
    2006
    
    
    2007Income taxes expenses:Current
    
    $
    (134,739
    )
    
    $
    626
    
    
    $
    70,913Deferred
    
    
    (322,289
    )
    
    
    40,081
    
    
    
    737,712Total
    
    $
    (457,028
    )
    
    $
    40,707
    
    
    $
    808,625
  December 31,2006
    
    
    2007Current deferred tax assets:Deferred revenue  current
    
    $
    135,658
    
    
    $
    841,315Accrued expenses and other liability
    
    
    34,820
    
    
    
    288,200Current deferred tax assets
    
    $
    170,478
    
    
    $
    1,129,515Non-current deferred tax assets (liabilities):Net operating loss carry forwards
    
    $
    802,010
    
    
    $
    1,136,729Intangible assets
    
    
    (204,043
    )
    
    
    (321,816
    )Property and equipment
    
    
    
    
    
    
    (30,457
    )597,967
    
    
    
    784,456Less: valuation allowance
    
    
    (743,500
    )
    
    
    (1,136,729
    )Non-current deferred tax liabilities, net
    
    $
    (145,533
    )
    
    $
    (352,273
    )Non-current deferred tax asset:Deferred revenue  non-current
    
    $
    
    
    
    $
    14,382
   F-35




---



##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 11. INCOME TAXES  continued
  Years ended December 31,2005
    
    2006
    
    2007%
    
    %
    
    %Statutory tax rate in PRC
    
    
    33.0
    
    
    
    (33.0
    )
    
    
    (33.0
    )Effect of tax holiday
    
    
    (18.0
    )
    
    
    (92.1
    )
    
    
    (91.8
    )Non-deductible expenses
    
    
    3.6
    
    
    
    139.9
    
    
    
    99.7Non-taxable income
    
    
    (10.3
    )
    
    
    (54.8
    )
    
    
    (16.7
    )Effect on deferred taxes due to changes in
tax rates under the new law for certain
subsidiaries
    
    
    
    
    
    
    
    
    
    
    18.5Change in valuation allowance
    
    
    0.7
    
    
    
    33.7
    
    
    
    7.0Effective tax rate
    
    
    9.0
    
    
    
    (6.3
    )
    
    
    (16.3
    )
     F-36




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 12. SHAREHOLDERS EQUITY
    Repurchased shares
  13. OTHER (EXPENSES) INCOME, NET
  2005
    
    
    2006
    
    
    2007Exchange gain, net
    
    $
    365,965
    
    
    $
    267,302
    
    
    $
    424,338Gain on partial disposal of an
investment in Moloon (see Note 5)
    
    
    
    
    
    
    116,071
    
    
    
    Others
    
    
    
    
    
    
    (1,498
    )
    
    
    8,731$
    365,965
    
    
    $
    381,875
    
    
    $
    433,069
  F-37




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 14. INCOME (LOSS) PER SHARE
  Years ended December 31,2005
    
    
    2006
    
    
    2007Net income (loss) attributable to ordinary
shareholders, basic and diluted
    
    $
    4,624,187
    
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )Weighted average ordinary shares
outstanding used in computing
basic net income per share
    
    
    94,341,061
    
    
    
    93,650,653
    
    
    
    94,500,529Plus: Incremental shares from assumed
conversions of stock options
    
    
    10,440,431
    
    
    
    
    
    
    
    Weighted average ordinary shares
outstanding used in computing
diluted net income per share (note)
    
    
    104,781,492
    
    
    
    93,650,653
    
    
    
    94,500,529Net income (loss) per share-basic
    
    $
    0.05
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Net income (loss) per share-diluted
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )
  Note:


|1. |  | In 2006, the Company transferred 3,000,000 ordinary shares to its depositary
bank representing 750,000 ADSs to be issued to employees and non-employees upon the
exercise of their vested share options. As of December 31, 2007, shares out of such
2,526,280 shares had been issued to the employees and non-employees upon exercise of
their share options and 473,720 shares remained available for future issuances. As a
result, 473,720 ordinary shares were excluded in computing basic net income per share.                            
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | In July 2007, the Company adopted granted non-vested shares covering 10,558,493
ordinary shares of the Company to the employees who are eligible for the 2007 Plan.
The vesting of the non-vested shares are subject to achieving certain financial
performance targets stated in the 2007 Plan. Nonvested shares have not be included in
the computation of basic earnings per share as such shares are considered contingently
returnable shares if the employee does not render the requisite service, the shares are
returned to the Company.
|  
|3. |  | The Group has options and non-vested shares outstanding which could potentially
dilute basic net income/(loss) per share, but which were excluded from the computation
of diluted net income/(loss) per share for the year end December 31, 2006 and 2007, as
their effects would have been auti-dilutive. Such outstanding options and non-vested
shares consist of 15,950,488 options for year end December 31, 2006, and 18,691,688
options and 10,558,493 non-vested shares for year end December 31, 2007.                                  

F-38



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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 15. MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION
  16. COMMITMENTS
   Year ending2008
    
    $
    2,007,8002009
    
    
    1,496,4962010
    
    
    1,046,9442011
    
    
    324,3382012
    
    
    22,128Total
    
    $
    4,897,706
 17. SEGMENT AND GEOGRAPHIC INFORMATION
  F-39




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 17. SEGMENT AND GEOGRAPHIC INFORMATION  continued
  For the year ended December 31, 2007
 Subscriptionservices andother related
    
    
    Brokerageservices
    
    
    services
    
    
    ConsolidatedNet revenue
    
    $
    25,822,178
    
    
    $
    80,896
    
    
    $
    25,903,074Cost of revenue
    
    
    (4,403,605
    )
    
    
    (22,997
    )
    
    
    (4,426,602
    )Operating expensesGeneral and administrative
    
    
    (7,599,367
    )
    
    
    (184,301
    )
    
    
    (7,783,668
    )Product development
    
    
    (2,268,878
    )
    
    
    
    
    
    
    (2,268,878
    )Sales and marketing
    
    
    (6,911,624
    )
    
    
    (12,712
    )
    
    
    (6,924,336
    )Total operating expenses
    
    
    (16,779,869
    )
    
    
    (197,013
    )
    
    
    (16,976,882
    )Government subsidies
    
    
    135,834
    
    
    
    
    
    
    
    135,834Income (loss) from operations
    
    
    4,774,538
    
    
    
    (139,114
    )
    
    
    4,635,424Total assets
    
    
    95,774,776
    
    
    
    8,109,972
    
    
    
    103,884,748
   Years ended December 31,2005
    
    
    2006
    
    
    2007Subscription fees
    
    $
    5,811,395
    
    
    $
    5,075,830
    
    
    $
    22,712,043Advertising revenue
    
    
    996,311
    
    
    
    1,337,630
    
    
    
    1,560,194SMS revenue
    
    
    
    
    
    
    298,232
    
    
    
    1,339,321Brokerage service revenue
    
    
    
    
    
    
    
    
    
    
    80,896Others
    
    
    674,460
    
    
    
    416,386
    
    
    
    210,620$
    7,482,166
    
    
    $
    7,128,078
    
    
    $
    25,903,074
 F-40




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
 18. RESTRICTED NET ASSETS
   19. SUBSEQUENT EVENT
  F-41




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 
 Additional Information  Financial Statement Schedule I
 Financial information of Parent Company
Balance sheets
(In U.S. dollars, except share-related data)
 December 31,2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,758,063
    
    
    $
    19,374,617Amounts due from subsidiaries
    
    
    64,172
    
    
    
    4,408,362Prepaid expenses and other current assets
    
    
    93,618
    
    
    
    133,572Dividends receivable
    
    
    2,473,269
    
    
    
    Total current assets
    
    
    8,389,122
    
    
    
    23,916,551Investments in subsidiaries
    
    
    37,615,158
    
    
    
    43,844,335Cost-method investment
    
    
    12,606,571
    
    
    
    1,479,571Goodwill
    
    
    50,534
    
    
    
    50,534Loans receivable from subsidiaries
    
    
    4,000,000
    
    
    
    Total assets
    
    $
    62,661,385
    
    
    $
    69,290,991Liabilities and shareholders equityCurrent liabilities:Accrued expenses and other current liabilities
    
    
    148,072
    
    
    
    1,868,059Amounts due to a subsidiary
    
    
    60,534
    
    
    
    60,537Total current liabilities
    
    $
    208,606
    
    
    $
    1,928,596Shareholders equityOrdinary shares ($0.00013 par value; 500,000,000 shares
authorized; shares issued and outstanding 104,384,933
in 2006 and 109,754,433 in 2007)
    
    
    13,474
    
    
    
    14,172Additional paid-in capital
    
    
    52,555,919
    
    
    
    58,727,378Accumulated other comprehensive income
    
    
    1,634,269
    
    
    
    4,501,432Retained earnings
    
    
    8,249,117
    
    
    
    4,119,413Total shareholders equity
    
    
    62,452,779
    
    
    
    67,362,395Total liabilities and shareholders equity
    
    $
    62,661,385
    
    
    $
    69,290,991
 F-42




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 Financial information of Parent Company
Statements of operations
(In U.S. dollars)
 December 31,2005
    
    
    2006
    
    
    2007Operating expenses:General and administrative
    
    $
    692,453
    
    
    $
    873,496
    
    
    $
    975,931Stock-based compensation
    
    
    370,781
    
    
    
    1,183,662
    
    
    
    2,946,340Total operating expenses
    
    
    1,063,234
    
    
    
    2,057,158
    
    
    
    3,922,271Interest income
    
    
    560,772
    
    
    
    202,484
    
    
    
    253,003Equity in earnings of subsidiaries and VIEs
    
    
    5,126,649
    
    
    
    2,395,622
    
    
    
    10,299,974Other income
    
    
    
    
    
    
    180,419
    
    
    
    366,590Loss from impairment of cost method
investment
    
    
    
    
    
    
    (1,322,000
    )
    
    
    (11,127,000
    )Net income (loss)
    
    $
    4,624,187
    
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )
 F-43




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 Financial Information of Parent Company
Statement of Shareholders Equity and Other Comprehensive Income
(In U.S. dollars, except share-related data)
 AccumulatedotherAdditional
    
    
    Deferred
    
    
    comprehensive
    
    
    
    
    
    
    TotalOrdinary shares
    
    
    paid-in
    
    
    stock-based
    
    
    income
    
    
    Retained
    
    
    shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    capital
    
    
    compensation
    
    
    (loss)
    
    
    earnings
    
    
    equity
    
    
    incomeBalances as of January 1, 2005
    
    
    99,329,933
    
    
    $
    12,814
    
    
    $
    64,175,132
    
    
    $
    (325,221
    )
    
    $
    (11
    )
    
    $
    4,225,563
    
    
    $
    68,088,277Repurchase of ordinary shares
    
    
    
    
    
    
    
    
    
    
    (13,200,394
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,200,394
    )Issuance of ordinary shares to employees
    
    
    2,000,000
    
    
    
    263
    
    
    
    276,713
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    276,976Stock options issued to non-employees
    
    
    
    
    
    
    
    
    
    
    112,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,689Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    258,092
    
    
    
    
    
    
    
    
    
    
    
    258,092Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    671,133
    
    
    
    
    
    
    
    671,133
    
    
    $
    671,133Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,624,187
    
    
    
    4,624,187
    
    
    
    4,624,187Balance as of December 31, 2005
    
    
    101,329,933
    
    
    
    13,077
    
    
    
    51,364,140
    
    
    
    (67,129
    )
    
    
    671,122
    
    
    
    8,849,750
    
    
    
    60,830,960
    
    
    $
    5,295,320Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (67,129
    )
    
    
    67,129
    
    
    
    
    
    
    
    
    
    
    
    Issuance of ordinary shares for exercise of
stock option by employees
    
    
    3,000,000
    
    
    
    390
    
    
    
    66,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,843Exercise of share options by non-employees
    
    
    55,000
    
    
    
    7
    
    
    
    8,793
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,800Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,183,662
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183,662Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    963,147
    
    
    
    
    
    
    
    963,147
    
    
    $
    963,147Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600,633
    )
    
    
    (600,633
    )
    
    
    (600,633
    )Balance as of December 31, 2006
    
    
    104,384,933
    
    
    
    13,474
    
    
    
    52,555,919
    
    
    
    
    
    
    
    1,634,269
    
    
    
    8,249,117
    
    
    
    62,452,779
    
    
    $
    362,514Exercise of stock option by employees
    
    
    
    
    
    
    
    
    
    
    2,366,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,366,697Exercise of share options by non-employees
    
    
    5,369,500
    
    
    
    698
    
    
    
    858,422
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    859,120Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,946,340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,946,340Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,867,163
    
    
    
    
    
    
    
    2,867,163
    
    
    $
    2,867,163Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,129,704
    )
    
    
    (4,129,704
    )
    
    
    (4,129,704
    )Balance as of December 31, 2007
    
    
    109,754,433
    
    
    $
    14,172
    
    
    $
    58,727,378
    
    
    $
    
    
    
    $
    4,501,432
    
    
    $
    4,119,413
    
    
    $
    67,362,395
    
    
    $
    (1,262,541
    )
  F-44




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 Financial information of Parent Company
Statements of cash flows
(In U.S. dollars, except share-related data)
 December 31,2005
    
    
    2006
    
    
    2007Operating activities:Net income (loss)
    
    
    4,624,187
    
    
    
    (600,633
    )
    
    
    (4,129,704
    )Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating activities:Stock-based compensation
    
    
    370,781
    
    
    
    1,183,662
    
    
    
    2,946,340Loss from impairment of cost method investment
    
    
    
    
    
    
    1,322,000
    
    
    
    11,127,000Gain from disposal of cost method investment
    
    
    
    
    
    
    (116,071
    )
    
    
    Equity in earnings of subsidiaries
    
    
    (4,455,510
    )
    
    
    (958,872
    )
    
    
    (10,299,974
    )Changes in assets and liabilities:Dividend receivable
    
    
    
    
    
    
    (2,473,269
    )
    
    
    2,473,269Prepaid expenses and other current assets
    
    
    42,226
    
    
    
    (56,221
    )
    
    
    (39,954
    )Amounts due from subsidiaries
    
    
    
    
    
    
    (64,543
    )
    
    
    (4,344,190
    )Accrued expenses and other current liabilities
    
    
    (27,234
    )
    
    
    27,032
    
    
    
    1,719,911Amounts due to subsidiaries
    
    
    (477,841
    )
    
    
    41,947
    
    
    
    3Net cash provided by (used in) operating activities
    
    
    76,609
    
    
    
    (1,694,968
    )
    
    
    (547,299
    )Investing activities:Net increase in loans to subsidiaries
    
    
    (13,990,000
    )
    
    
    9,990,000
    
    
    
    4,000,000Proceeds from partial sale of cost method investment
    
    
    
    
    
    
    1,187,500
    
    
    
    Acquisition of businesses
    
    
    
    
    
    
    (6,582,144
    )
    
    
    (2,300,476
    )Investments in subsidiaries
    
    
    (20,500,000
    )
    
    
    
    
    
    
    Acquisition of cost investment
    
    
    (15,000,000
    )
    
    
    
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (49,490,000
    )
    
    
    4,595,356
    
    
    
    1,699,524Financing activities:Proceeds from stock options exercised by employees
    
    
    276,976
    
    
    
    66,843
    
    
    
    2,366,697Proceeds from exercise of options granted to non-employee
    
    
    
    
    
    
    8,800
    
    
    
    859,120Repurchase of treasury shares
    
    
    (13,200,394
    )
    
    
    
    
    
    
    Dividend from a subsidiary
    
    
    5,373,182
    
    
    
    
    
    
    
    9,238,436Net cash provided by (used in) financing activities
    
    
    (7,550,236
    )
    
    
    75,643
    
    
    
    12,464,253Effect of exchange rate changes
    
    
    (6
    )
    
    
    5
    
    
    
    76Net increase (decrease) in cash and cash equivalents
    
    
    (56,963,633
    )
    
    
    2,976,036
    
    
    
    13,616,554Cash and cash equivalents, beginning of the year
    
    
    59,745,660
    
    
    
    2,782,027
    
    
    
    5,758,063Cash and cash equivalents, end of the year
    
    $
    2,782,027
    
    
    $
    5,758,063
    
    
    $
    19,374,617
  Basis for preparation




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED