##### 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 endedDecember 31, 2008
 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 periodfrom  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 100140, China
 Jun Wang, Chief Financial Officer
Telephone: +(86 10) 58325399
Email: jun.wang@jrj.com.cn
Facsimile: +(86 10)58325200
9/F, Tower C, Corporate Square
No.35 Financial Street, Xicheng District
Beijing 100140, China
 (Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
  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 o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o  þ o
 o
  o o
  o þ




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##### 



CHINA FINANCE ONLINE CO. LIMITED
 TABLE OF CONTENTS
 INTRODUCTIONPART IITEM 1 Identity of Directors, Senior Management And Advisers
    
    
    4ITEM 2 Offer Statistics and Expected Timetable
    
    
    4ITEM 3 Key Information
    
    
    4ITEM 4 Information on the Company
    
    
    27ITEM 5 Operating and Financial Review and Prospects
    
    
    44ITEM 6 Directors, Senior Management and Employees
    
    
    59ITEM 7 Major Shareholders and Related Party Transaction
    
    
    67ITEM 8 Financial Information
    
    
    74ITEM 9 The Offer and Listing
    
    
    74ITEM 10 Additional Information
    
    
    75ITEM 11 Quantitative and Qualitative Disclosures About Market Risk
    
    
    81ITEM 12 Description of Securities Other than Equity Securities
    
    
    81PART IIITEM 13 Defaults, Dividend Arrearages and Delinquencies
    
    
    81ITEM 14 Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    81ITEM 15 Controls and Procedures
    
    
    81ITEM 16A Audit Committee Financial Expert
    
    
    83ITEM 16B Code of Ethics
    
    
    83ITEM 16C Principal Accountant Fee and Services
    
    
    83ITEM 16D Exemption from the Listing Standard for Audit Committees
    
    
    84ITEM 16E Purchases of Equity Securities by the Issue and Affiliated Purchasers
    
    
    84PART IIIITEM 17 Financial Statement
    
    
    84ITEM 18 Financial Statements
    
    
    84ITEM 19 Exhibits
    
    
    84EX-4.36EX-4.55EX-4.57EX-4.58EX-4.59EX-4.60EX-4.61EX-4.62EX-4.63EX-4.64EX-4.65EX-4.66EX-4.67EX-4.68EX-4.69EX-4.70EX-4.71EX-4.72EX-4.73EX-4.74EX-4.75EX-4.76EX-4.77EX-4.78EX-4.79EX-4.80EX-4.81EX-4.82EX-4.83EX-4.84EX-4.85EX-4.86EX-4.87EX-4.88EX-4.89EX-4.90EX-4.91EX-4.92EX-4.93EX-4.94EX-4.95EX-4.96EX-4.97EX-4.98EX-4.99EX-4.100EX-4.101EX-4.102EX-4.103EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1EX-15.2
  2




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INTRODUCTION
  
    
    we, us, our company, the company, our refer to China Finance Online Co.
Limited, or CFO Hong Kong and its subsidiaries, and, in the context of describing our
operations include our PRC-incorporated affiliates;
    
    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;
    
    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;
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
    
    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.
    
 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 .
  (in thousands of U.S. dollars, except per share
    
    For the year ended December 31,or per ADS data)(1)
    
    2004
    
    2005
    
    2006 (4)
    
    2007
    
    2008Consolidated statement of operations
and comprehensive income (loss) data:Net revenues
    
    
    6,016
    
    
    
    7,482
    
    
    
    7,128
    
    
    
    25,903
    
    
    
    56,243
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(in thousands of U.S. dollars, except per share
    
    For the year ended December 31,or per ADS data)(1)
    
    2004
    
    2005
    
    2006 (4)
    
    2007
    
    2008Cost of revenues
    
    
    (393
    )
    
    
    (482
    )
    
    
    (1,468
    )
    
    
    (4,427
    )
    
    
    (9,367
    )Gross profit
    
    
    5,623
    
    
    
    7,000
    
    
    
    5,660
    
    
    
    21,476
    
    
    
    46,876Operating expenses:General and administrative
    
    
    (730
    )
    
    
    (1,740
    )
    
    
    (2,956
    )
    
    
    (7,784
    )
    
    
    (15,371
    )Product development
    
    
    (172
    )
    
    
    (236
    )
    
    
    (742
    )
    
    
    (2,269
    )
    
    
    (5,635
    )Sales and marketing
    
    
    (800
    )
    
    
    (1,795
    )
    
    
    (2,666
    )
    
    
    (6,924
    )
    
    
    (13,521
    )Total operating expenses
    
    
    (1,702
    )
    
    
    (3,771
    )
    
    
    (6,364
    )
    
    
    (16,977
    )
    
    
    (34,527
    )Subsidy income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    437Income (loss) from operations
    
    
    3,921
    
    
    
    3,229
    
    
    
    (704
    )
    
    
    4,635
    
    
    
    12,786Interest income
    
    
    294
    
    
    
    1,486
    
    
    
    1,003
    
    
    
    1,105
    
    
    
    1,608Other income (expense)
    
    
    (2
    )
    
    
    
    
    
    
    115
    
    
    
    9
    
    
    
    (169
    )Exchange gain (net)
    
    
    
    
    
    
    366
    
    
    
    267
    
    
    
    424
    
    
    
    1,490Loss from impairment of cost method investment
    
    
    
    
    
    
    
    
    
    
    (1,322
    )
    
    
    (11,127
    )
    
    
    Income (loss) before income taxes
    
    
    4,213
    
    
    
    5,081
    
    
    
    (641
    )
    
    
    (4,954
    )
    
    
    15,715Income tax benefit (provision)
    
    
    384
    
    
    
    (457
    )
    
    
    41
    
    
    
    809
    
    
    
    3,047Purchased pre-acquisition earning
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227Minority interests in net income of consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    31Net income (loss)
    
    $
    4,597
    
    
    $
    4,624
    
    
    $
    (600
    )
    
    $
    (4,130
    )
    
    $
    19,020Dividends on preference shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) attributable to
ordinary shareholders
    
    $
    4,597
    
    
    $
    4,624
    
    
    $
    (600
    )
    
    $
    (4,130
    )
    
    $
    19,020Income (loss) per share-basic
    
    $
    0.12
    
    
    $
    0.05
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.19Income (loss) per share-diluted
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.17Income per ADS equivalent-basic(2)
    
    $
    0.59
    
    
    $
    0.25
    
    
    $
    (0.03
    )
    
    $
    (0.22
    )
    
    $
    0.96Income per ADS equivalent-diluted(2)
    
    $
    0.26
    
    
    $
    0.22
    
    
    $
    (0.03
    )
    
    $
    (0.22
    )
    
    $
    0.84Dividends declared per ordinary share or preference shares
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 For the year ended December 31,(in thousands of U.S. dollars)(1)
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008Consolidated balance sheet data:Cash and cash equivalents
    
    $
    70,596
    
    
    $
    46,168
    
    
    $
    44,956
    
    
    $
    74,729
    
    
    $
    97,544Current working capital(3)
    
    
    67,590
    
    
    
    45,227
    
    
    
    38,011
    
    
    
    53,811
    
    
    
    78,226Total assets
    
    
    71,861
    
    
    
    63,113
    
    
    
    71,119
    
    
    
    103,885
    
    
    
    141,823Deferred revenue, current
    
    
    3,487
    
    
    
    1,859
    
    
    
    6,419
    
    
    
    20,457
    
    
    
    28,202Total current liabilities
    
    
    3,773
    
    
    
    2,282
    
    
    
    8,521
    
    
    
    31,034
    
    
    
    35,472Deferred revenue, non-current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,665
    
    
    
    8,786Total shareholders equity
    
    $
    68,088
    
    
    $
    60,831
    
    
    $
    62,453
    
    
    $
    67,362
    
    
    $
    96,942
 
 (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
    
    
    7.60722008
    
    
    6.9477
 For consolidated balance sheet data, all translations from Renminbi to U.S. dollars were calculated
at the exchange rate at the end of that year. The exchange rates were as set forth below as of the
corresponding dates: As at December 31,
    
    RMB per US$1.002003
    
    
    8.27692004
    
    
    8.27652005
    
    
    8.07022006
    
    
    7.80872007
    
    
    7.29462008
    
    
    6.8225
 (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. 5




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Exchange Rate Information
    Average(1)
    
    High
    
    Low
    
    Period-end(RMB per U.S.$1.00)December 31, 2004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.2765December 31, 2005
    
    
    8.1472
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.0702December 31, 2006
    
    
    7.9693
    
    
    
    8.0705
    
    
    
    7.8051
    
    
    
    7.8087December 31, 2007
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.2946
    
    
    
    7.2946December 31, 2008
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.7800
    
    
    
    6.8225Most recent six months:November 2008
    
    
    6.8281
    
    
    
    6.8373
    
    
    
    6.8220
    
    
    
    6.8254December 2008
    
    
    6.8539
    
    
    
    6.8842
    
    
    
    6.8225
    
    
    
    6.8225January 2009
    
    
    6.8382
    
    
    
    6.8399
    
    
    
    6.8360
    
    
    
    6.8380February 2009
    
    
    6.8357
    
    
    
    6.8398
    
    
    
    6.8327
    
    
    
    6.8379March 2009
    
    
    6.8341
    
    
    
    6.8395
    
    
    
    6.8293
    
    
    
    6.8359April 2009
    
    
    6.8312
    
    
    
    6.8370
    
    
    
    6.8250
    
    
    
    6.8250May 2009 (through 15th)
    
    
    6.8228
    
    
    
    6.8247
    
    
    
    6.8201
    
    
    
    6.8247
 
 (1)
    
    Averages are calculated from month-end rates. B. Capitalization and indebtedness.
  C. Reasons for the offer and use of proceeds.
  D. Risk factors.
 Risks relating to our business
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The unprecedented global financial crisis and economic downturn could adversely affect the 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, futures trading and wealth management business in Hong Kong operate in a
highly regulated industry and compliance failures could adversely affect our business.
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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 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
  We face significant competition which could adversely affect our business, financial condition and
results of operations .
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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.
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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.
  Acquisitions present many risks, and we may not realize the financial and strategic goals that were
contemplated at the time of the acquisitions.
 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;
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
    
    we may have multiple and overlapping product lines that are offered, priced and
supported differently, which could cause customer confusion and delays;
    
    our due diligence process may fail to identify problems, such as issues with unlicensed
use of intellectual property;
    
    we may have legal and tax exposures or lose anticipated tax benefits as a result of
unforeseen difficulties in our legal entity integration activities;
    
    we may face contingencies related to intellectual property, financial disclosures and
accounting practices or internal controls;
    
    our ongoing business may be disrupted and our managements attention may be diverted by
transition or integration issues; and
    
    to the extent that we issue a significant amount of equity securities in connection with
future acquisitions, existing ADS holders and shareholders may be diluted and earnings per
share may decrease.
  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.
  12




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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.
    13




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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 CFO Software from enterprise income tax from 2005 to 2007; and
    
    providing CFO Software a preferential enterprise income tax rate of 7.5% from 2008 to
2010, and 15% for taxable years thereafter.
    14




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
    
    providing CFO Software tax exemption for the year 2007 and a reduced tax rate of 7.5%
for the years 2008, 2009 and 2010; and
    
    Providing CFO Meining and CFO Genius a reduced tax rate of 15% for the years 2008, 2009
and 2010.
  
    
    providing CFO Success tax exemption for the years 2008 and 2009 and a preferential EIT
rate of 12.5% for the years 2010, 2011 and 2012.
    
    Providing CFO Zhengning tax exemption for the year 2008 and a preferential EIT rate of
12.5% for the years 2009, 2010 and 2011.
    Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC
withholding tax.
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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.
  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.
  16




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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.
  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 shutdowns, or efforts to gain unauthorized access to our systems causing loss or
corruption of data or malfunctions of software or hardware; and
    
    Any disruption or failure in the national backbone network, which would prevent our
users from logging on to our website or accessing our services.
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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 primarily rely on contractual arrangements with CFO Fuhua, Beijing Glory Technology Co., Ltd.,
or CFO Glory , Beijing Premium Technology Co., Ltd., or CFO Premium, and CFO Newrand, Huifu Jinyuan
Co., Ltd., or CFO Huifu, CFO Zhongcheng, Shanghai Shangtong Co., Ltd., or CFO Shangtong and
Shanghai Chongzhi Co., Ltd., or CFO Chongzhi, 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 their 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.
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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 .
  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;
    
    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
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##### Table of Contents




    
    Taking other regulatory or enforcement actions, including levying fines that could be
harmful to our business.
  Contractual arrangements we have entered into with our PRC-incorporated affiliates may be subject
to scrutiny by the PRC tax authorities and a finding that we or our PRC-incorporated affiliates owe
additional taxes could substantially reduce our consolidated net income.
  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.
   20




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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.
   The PRC legal system embodies uncertainties which could limit the legal protections available to
you and us.
  21




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##### Table of Contents



Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
  Fluctuations in exchange rates could result in foreign currency exchange losses.
    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.
  22




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##### Table of Contents



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.
   23




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##### Table of Contents



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 chief executive officer and chief financial officer, 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 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.
 24




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##### Table of Contents




    
    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.
   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.
   25




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##### Table of Contents



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.
  26




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##### Table of Contents



ITEM 4. INFORMATION ON THE COMPANY
 A. History and development of the company.
 www.jrj.com.cn, www.jrj.com,
    www.stockstar.com
  
 27




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##### Table of Contents



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.
 28




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##### Table of Contents



www.jrj.com www.stockstar.com
   Comprehensive.
  Integrated.
  Interactive.
  29




---



##### Table of Contents



Timely.
  Unbiased.
  Easy to use.
    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;
 30




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##### Table of Contents




    
    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.
  
    
    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.
 31




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Research reports.
  Online forums.
  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.
     32




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##### Table of Contents



Our research tools
   
    
    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
 33




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##### Table of Contents



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.
   
    
    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
 Customer support
 34




---



##### Table of Contents



Our content providers
  Shanghai and Shenzhen Stock Exchanges
    Data providers
  35




---



##### Table of Contents



Financial Institutions, securities advisors and stock brokerages
  News and media conglomerates
  Chinese news publishers and media companies
  Sales and marketing
   Product development
  36




---



##### Table of Contents




    
    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.
  Database technology.
  Remote data aggregation engine.
  Competition
  37




---



##### Table of Contents




    
    publishers and distributors of traditional media, including print, radio and television
as well as radio and television programs and news focused on financial news and
information;
    
    internet portals providing information on business, finance and investing;
    
    financial information web pages offered by websites;
    
    personal stock research software vendors, especially those that develop and market stock
research software through stock brokerage companies; and
    
    stock brokerage companies, especially stock brokerage companies with online trading
capabilities.
   Intellectual property
   www.stockstar.com www.jrj.com.cn
 Regulation
  
    
    Ministry of Industry and Information;
 38




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##### Table of Contents




    
    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
    
    the Ministry of Commerce.
  Foreign ownership restriction on Internet content provision businesses
   Licenses and permits
       39




---



##### Table of Contents



Regulation of Internet content
  
 Regulation of information security
   Intellectual property rights
   www.jrj.com and www.stockstar.com,
 40




---



##### Table of Contents



Website name
  Privacy protection
  Advertising regulation
  C. Organizational structure.
   41




---



##### Table of Contents



Percentage ofJurisdiction
    
    Beneficialof
    
    OwnershipName
    
    Incorporation
    
    InterestFortune Software (Beijing) Co., Ltd
    
    PRC
    
    
    100
    %China Finance Online (Beijing) Co., Ltd.
    
    PRC
    
    
    100
    %Beijing Fuhua Innovation Technology Development
Co., Ltd. *
    
    PRC
    
    
    100
    %Stockstar Information Technology (Shanghai) Co., Ltd
    
    PRC
    
    
    100
    %Shanghai Meining Computer Software Co., Ltd.*
    
    PRC
    
    
    100
    %Zhengning Information & Technology (Shanghai) Co.,
Ltd.
    
    PRC
    
    
    100
    %Shenzhen Genius Information Technology Co., Ltd.
    
    PRC
    
    
    100
    %Jujin Software (Shenzhen) Co., Ltd.
    
    PRC
    
    
    100
    %Fortune
(Beijing) Wisdom Technology Co., Ltd.
    
    PRC
    
    
    100
    %Fortune (Beijing) Success Technology Co., Ltd.
    
    PRC
    
    
    100
    %Beijing CFO Glory Co., Ltd*
    
    PRC
    
    
    100
    %Beijing CFO Premium Technology Co., Ltd*
    
    PRC
    
    
    100
    %Daily Growth Holdings Limited
    
    BVI
    
    
    100
    %Daily Growth Futures Limited
    
    Hong Kong
    
    
    100
    %Daily Growth Securities Limited
    
    Hong Kong
    
    
    100
    %Daily Growth Wealth Management Limited
    
    PRC
    
    
    100
    %Shenzhen Juda Co., Ltd.
    
    PRC
    
    
    100
    %Shanghai Zhengtong Co., Ltd.
    
    PRC
    
    
    100
    %Shanghai Zhengyong Co., Ltd.
    
    PRC
    
    
    100
    %Shenzhen Newrand Advisory and Investment Co., Ltd.*
    
    PRC
    
    
    100
    %Shanghai Shangtong Co., Limited*
    
    PRC
    
    
    100
    %Shanghai Chongzhi Co., Ltd.*
    
    PRC
    
    
    100
    %Huifu Jinyuan Co., Ltd.*
    
    PRC
    
    
    100
    %Zhongcheng Futong Co., Ltd*
    
    PRC
    
    
    100
    %Giant Bright International Holdings Limited
    
    BVI
    
    
    100
    %Danford (H.K.) Limited
    
    Hong Kong
    
    
    100
    %
 
 *
    
    Denotes variable interest entity 42




---



##### Table of Contents



Loan Agreements.
  Purchase Option Agreement .
   43




---



##### Table of Contents



Voting arrangement.
 Share Pledge Agreement .
  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 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.
 44




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##### Table of Contents



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;
    
    termination of our TopView series of market data analysis products. On December 31,
2008, SSEINC terminated the provision of TopView data to third party software vendors,
including us. We subsequently terminated the offering of TopView products to our
customers. We expect material impact to our 2009 operating results from the TopView
termination;
    
    contribution of alternative revenue resources such as revenues from online advertising;
    
    seasonality associated with the level of activity of our users and subscribers and the
trading activities of Chinas securities markets;
    
    tax refund from the PRC tax authorities for value-added-taxes we are required to pay on
the sale of subscriptions to our service packages;
    
    other tax incentives we receive from PRC tax authorities resulting from CFO
Success, CFO Zhengning and CFO Jujin being the New Software Manufacture Enterprises and
CFO Meining and CFO Genius being the High and New Technology companies;
    
    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;
    
    our ability to benefit from the acquisition of CFO Stockstar, CFO Genius, Daily Growth
Securities and the contractual arrangements with CFO Newrand, CFO Huifu and CFO
Zhongcheng, CFO Shangtong and CFO Chongzhi; and
    
    PRC telecommunication and regulatory policies.
  45




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##### Table of Contents



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
  Net revenues
   Years ended December 31,2006
    
    
    2007
    
    
    2008Subscription fees
    
    $
    5,075,830
    
    
    $
    22,712,043
    
    
    $
    49,551,711Advertising revenue
    
    
    1,337,630
    
    
    
    1,560,194
    
    
    
    2,946,389SMS revenue
    
    
    298,232
    
    
    
    1,339,321
    
    
    
    1,047,218
 46




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##### Table of Contents



Years ended December 31,2006
    
    
    2007
    
    
    2008Brokerage service revenue
    
    
    
    
    
    
    80,896
    
    
    
    956,549Others
    
    
    416,386
    
    
    
    210,620
    
    
    
    1,740,901$
    7,128,078
    
    
    $
    25,903,074
    
    
    $
    56,242,768
 Revenue recognition
    Cost of revenues
  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.
 47




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##### Table of Contents



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; and
    
    professional services and other related costs associated with being publicly listed in
the United States; and
  General and administrative expenses.
 Product development expenses.
 Sales and marketing expenses.
 Stock option plan and option agreements
  48




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##### Table of Contents



Critical accounting policies
  Income taxes.
 49




---



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Stock-based compensation.
  Cost method investment.
 Goodwill.
   Impairment of long-lived assets.
 50




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##### Table of Contents



Results of operations
  For the year ended December 31,(in thousands of U.S. dollars, exceptas % of net revenues)(1)
    
    2006
    
    2007
    
    2008Consolidated statement of operations
and comprehensive income (loss) data:Gross revenues(2)
    
    $
    7,337
    
    
    
    102.9
    %
    
    $
    26,570
    
    
    
    102.6
    %
    
    $
    57,146
    
    
    
    101.6
    %Business tax
    
    
    (209
    )
    
    
    (2.9
    )
    
    
    (667
    )
    
    
    (2.6
    )
    
    
    (903
    )
    
    
    (1.6
    )Net revenues
    
    
    7,128
    
    
    
    100
    %
    
    
    25,903
    
    
    
    100
    %
    
    
    56,243
    
    
    
    100
    %Cost of revenues
    
    
    (1,468
    )
    
    
    (20.6
    )
    
    
    (4,427
    )
    
    
    (17.1
    )
    
    
    (9,367
    )
    
    
    (16.7
    )Gross profit
    
    
    5,660
    
    
    
    79.4
    
    
    
    21,476
    
    
    
    82.9
    
    
    
    46,876
    
    
    
    83.3Operating expenses:General and administrative
    
    
    (2,956
    )
    
    
    (41.5
    )
    
    
    (7,784
    )
    
    
    (30.1
    )
    
    
    (15,371
    )
    
    
    (27.3
    )Product development
    
    
    (742
    )
    
    
    (10.4
    )
    
    
    (2,269
    )
    
    
    (8.8
    )
    
    
    (5,635
    )
    
    
    (10.0
    )Sales and marketing
    
    
    (2,666
    )
    
    
    (37.4
    )
    
    
    (6,924
    )
    
    
    (26.7
    )
    
    
    (13,521
    )
    
    
    (24.0
    )Total operating expenses
    
    
    (6,364
    )
    
    
    (89.3
    )
    
    
    (16,977
    )
    
    
    (65.5
    )
    
    
    (34,527
    )
    
    
    (61.4
    )Subsidy income
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    0.5
    
    
    
    437
    
    
    
    0.8Income (loss)from operations
    
    
    (704
    )
    
    
    (9.9
    )
    
    
    4,635
    
    
    
    17.9
    
    
    
    12,786
    
    
    
    22.7Interest income
    
    
    1,003
    
    
    
    14.1
    
    
    
    1,105
    
    
    
    4.3
    
    
    
    1,608
    
    
    
    2.9Exchange gain (net)
    
    
    267
    
    
    
    3.7
    
    
    
    424
    
    
    
    1.6
    
    
    
    1,490
    
    
    
    2.6Other expense, net
    
    
    115
    
    
    
    1.6
    
    
    
    9
    
    
    
    0.03
    
    
    
    (169
    )
    
    
    (0.3
    )Loss from impairment of cost method
investment
    
    
    (1,322
    )
    
    
    (18.5
    )
    
    
    (11,127
    )
    
    
    (43.0
    )
    
    
    
    
    
    
    Income (loss) before income taxes
benefit (provision)
    
    
    (641
    )
    
    
    (9.0
    )
    
    
    (4,954
    )
    
    
    (19.1
    )
    
    
    15,715
    
    
    
    27.9Purchased pre-acquisition earning
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    0.4Minority interests in net income of
consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    0.06
    
    
    
    31
    
    
    
    0.1Income tax benefit (provision)
    
    
    41
    
    
    
    0.58
    
    
    
    809
    
    
    
    3.1
    
    
    
    3,047
    
    
    
    5.4Net income (loss)
    
    $
    (600
    )
    
    
    (8.4
    %)
    
    $
    (4,130
    )
    
    
    (15.9
    %)
    
    $
    19,020
    
    
    
    33.8
    %
 Year ended December 31, 2008 compared to year ended December 31, 2007
 Revenues
     51




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Cost of revenues
  Gross profit
  Operating expenses
  General and administrative.
 Product development.
 Sales and marketing.
 Income from operations
  Interest income
  Loss from impairment of cost method investment
   52




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Income tax benefit
  Net income/(loss)
  Year ended December 31, 2007 compared to year ended December 31, 2006
 Revenues
     Cost of revenues
 53




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##### Table of Contents



Gross profit
  Operating expenses
  General and administrative.
 Product development.
 Sales and marketing.
 Income/(loss) from operations
  Interest income
  Loss from impairment of cost method investment
   54




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Income tax benefit
  Net loss
  B. Liquidity and capital resources.
 Cash flows and working capital
   For the year ended December 31(in thousands of U.S. dollars)
    
    2006
    
    2007
    
    2008Net cash provided by operating activities
    
    $
    5,892
    
    
    $
    28,426
    
    
    $
    27,849Net cash used in investing activities
    
    
    (8,202
    )
    
    
    (4,830
    )
    
    
    (7,410
    )Net cash (used in) provided by financing activities
    
    
    76
    
    
    
    3,226
    
    
    
    573Net (decrease) increase in cash and cash equivalents
    
    
    (1,213
    )
    
    
    29,773
    
    
    
    22,815Cash and cash equivalents at beginning of year
    
    
    46,168
    
    
    
    44,956
    
    
    
    74,729Cash and cash equivalents at end of year
    
    $
    44,956
    
    
    $
    74,729
    
    
    $
    97,544
    Capital resources
 55




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##### Table of Contents



Restricted net assets
   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.
 56




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##### Table of Contents



Office Premises
    
    Data Purchase
    
    Total(in U.S. dollars)Less than 1 year
    
    
    1,905,425
    
    
    
    501,026
    
    
    
    2,406,4511 - 3 years
    
    
    1,801,015
    
    
    
    35,116
    
    
    
    1,836,1313 - 5 years
    
    
    
    
    
    
    
    
    
    
    
  G. Quantitative and qualitative disclosures about market risk.
 Interest rate risk
  Foreign currency risk
   Recent accounting standards.
   57




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##### Table of Contents



58




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##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and senior management.
  59




---



##### Table of Contents



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)
    
    
    61
    
    
    DirectorLing Wang(1)(2)(3)
    
    
    46
    
    
    DirectorFansheng Guo(1)(2)(3)
    
    
    53
    
    
    DirectorJun (Jeff) Wang
    
    
    38
    
    
    Chief Financial OfficerCaogang Li
    
    
    43
    
    
    Chief Operating OfficerZuoli Xu
    
    
    39
    
    
    Chief Strategy Officer
 
 (1)
    
    Member, audit committee(2)
    
    Member, compensation committee(3)
    
    Member, nominations committee   Biographical Information
 Hugo Shong
 Zhiwei Zhao
 Kheng Nam Lee
 Ling Wang
 Fansheng Guo
 Jun (Jeff) Wang
 60




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##### Table of Contents



Dr. Caogang Li
 Zuoli (Alex) Xu
 B. Compensation of directors and executive officers.
   Directors and officers liability insurance
  Employees stock option plan
  61




---



##### 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, 2017Zuoli Xu
    
    
    *
    
    
    $
    1.26
    
    
    December 1, 2008
    
    November 30, 2018
 
 *
    
    Upon exercise of all options granted, would beneficially own less than
1% of our outstanding ordinary shares. 62




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Equity Incentive Plan
   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;
    
    reviewing and approving all proposed related-party transactions, as defined in Item 404
of Regulation S-K under the U.S. securities laws;
 63




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##### Table of Contents




    
    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;
    
    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.
 64




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##### Table of Contents



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;
    
    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 .
  65




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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.
  *
    
    Unless otherwise noted, the address of each shareholder is China Finance Online (Beijing) Co.,
Ltd., 9th Floor of Tower C, Corporate Square, No.35 Financial Street, Xicheng District, Beijing,
China 100140.  Name
    
    Number
    
    Percent5% ShareholderIDG Technology Venture Investment, Inc.(1)
    
    
    20,580,652
    
    
    
    18.71
    %IDG Technology Venture Investments, LP (2)
    
    
    6,723,115
    
    
    
    6.11
    %Vertex Technology Fund (III) Ltd. (3)
    
    
    7,595,573
    
    
    
    6.90
    %Jianping Lu (4)
    
    
    7,156,121
    
    
    
    6.50
    %Ling Zhang (5)
    
    
    8,746,370
    
    
    
    7.95
    %C&F International Holdings Limited (6)
    
    
    10,558,493
    
    
    
    9.60
    %Directors and executive officersHugo Shong
    
    
    *
    
    
    
    *Kheng Nam Lee
    
    
    *
    
    
    
    *Ling Wang
    
    
    *
    
    
    
    *Fansheng Guo
    
    
    *
    
    
    
    *Zhiwei Zhao
    
    
    4,959,671
    
    
    
    4.51
    %Jun (Jeff) Wang
    
    
    *
    
    
    
    *Caogang Li
    
    
    *
    
    
    
    *Zuoli Xu
    
    
    *
    
    
    
    *All current directors and executive officers as
a group (8 persons)
    
    
    7,288,224
    
    
    
    6.63
    %
 
 *
    
    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. 66




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##### Table of Contents



(2)
    
    Includes 6,723,115 ordinary shares held by IDG
Technology Venture Investments, LP. The general
partner of IDG Technology Venture Investments, LP
is IDG Technology Venture Investments, LLC. Messrs.
Patrick McGovern and Quan Zhou are managing members
of IDG Technology Venture Investments, LLC, both of
whom disclaim beneficial ownership of our shares
held by IDG Technology Venture Investments, LLC.
IDG Technology Venture Investment, Inc. is a
limited partner of IDG Technology Venture
Investments, LP, and does not control IDG
Technology Venture Investments, LP. IDG Technology
Venture Investments, LP disclaims beneficial
ownership of all of the ordinary shares owned by
IDG Technology Venture Investment, Inc. The
registered address of IDG Technology Venture
Investments, LP is Corporation Service Company,
1013 Centre Road, Wilmington, County of New Castle,
Delaware 19805-1297, U.S.A.(3)
    
    Includes 7,595,573 ordinary shares held by Vertex
Technology Fund (III) Ltd as of 31 December 2008 in
the form of 1,519,113 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 250
North Bridge Road, #05-01 Raffles City Tower,
Singapore 179101(4)
    
    Includes (i) 4,028,156 ordinary shares held by Cast
Technology, Inc.; and (ii) 3,127,965 ordinary
shares held by Fanasia Capital Limited. Both Cast
Technology, Inc. and Fanasia Capital Limited are
held 45% and 55% by Jianping Lu and Ling Zhang,
respectively.(5)
    
    Includes (i)4,923,302 ordinary shares held by Cast
Technology, Inc.; and (ii) 3,823,068 ordinary
shares held by Fanasia Capital Limited. Both Cast
Technology, Inc. and Fanasia Capital Limited are
held 45% and 55% by Jianping Lu and Ling Zhang,
respectively.(6)
    
    Includes 10,558,493 ordinary shares held by C&F
International Holdings Limited, a company
incorporated in British Virgin Islands. C&F
International Holdings Limited holds the ordinary
shares on behalf of and exclusively for the benefit
of the group of employees eligible for the 2007
Equity Incentive Plan. C&F International Holdings
Limited is 100% owned by C&F Global Limited, a
British Virgin Islands Company, which is in turn
owned by the selected employees.  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major shareholders.
  B. Related party transactions .
 Contractual arrangements with CFO Fuhua and its shareholders.
  67




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Loan Agreements.
  Purchase Option Agreement .
   Voting arrangement.
 68




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##### Table of Contents



Share Pledge Agreement .
 Financing support.
 Indemnifications.
 Contractual Arrangements with CFO Premium and its shareholders
  Strategic Consulting Service Agreement .
 Technical Support Agreement .
 Operation Agreement .
 69




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##### Table of Contents



Loan Agreements.
 Purchase Option Agreement
 Voting Arrangement
 Share Pledge Agreement .
 Contractual Arrangements with CFO Glory and its individual shareholders
  
    
    a strategic consulting service agreement between CFO Software and CFO Glory;
    
    a technical support agreement between CFO Software and CFO;
    
    an operation agreement between CFO Software and CFO Glory;
    
    Loan agreements with Wu Chen, Zhiwei Zhao and Jun Wang. On September 1, 2007, we entered
into a loan agreement with Wu Chen and Zhiwei Zhao, the shareholders of CFO Glory, to extend
to each of Wu Chen and Zhiwei Zhao a loan in the amount of $77,000 and $63,000, respectively,
for the sole purpose of financing their investments in CFO Glory as CFO Glorys registered
capital. On September 10, 2007, we entered into a loan agreement with Jun Wang to extend to
Jun Wang a loan in the amount of $77,000 for the sole purpose of financing Jun Wang to acquire
Wu Chens entire holdings in CFO Glory;
    
    a purchase option agreement among CFO Software, CFO Glory, Zhiwei Zhao and Jun Wang;
    
    voting arrangements with each of Jun Wang and Zhiwei Zhao regarding their voting rights in
CFO Glory; and
    
    a share pledge agreement among CFO Software, Zhiwei Zhao and Jun Wang.
 Contractual Arrangements with CFO Shangtong and its individual shareholders
 70




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
    
    a strategic consulting service agreement between CFO Software and CFO Shangtong;
    
    a technical support agreement between CFO Software and CFO Shangtong;
    
    an operation agreement between CFO Software and CFO Shangtong;
    
    a loan agreement with Shaoming Shi and Lin Yang. We entered into a loan agreement with
Shaoming Shi and Lin Yang to extend to each of them a loan in the amount of $80,615 and
$65,958, respectively, for the sole purpose of financing their investments in CFO Shangtong as
CFO Shangtongs registered capital;
    
    a purchase option agreement among CFO Software, CFO Shangtong, Lin Yang and Shaoming Shi;
    
    voting arrangements with each of Shaoming Shi and Lin Yang regarding their voting rights in
CFO Shangtong; and
    
    a share pledge agreement among CFO Software, Lin Yang and Shaoming Shi.
 Contractual Arrangements with CFO Chongzhi and Its Individual Shareholders
  
    
    a strategic consulting service agreement between CFO Software and CFO Chongzhi;
    
    a technical support agreement between CFO Software and CFO Chongzhi;
    
    an operation agreement between CFO Software and CFO Chongzhi;
    
    a loan agreement with Xun Zhao and Zhenfei Fan. We entered into a loan agreement with Xun
Zhao and Zhenfei Fan to extend to them a loan in the amount of $65,958 and $80,615,
respectively, for the sole purpose of financing their acquisition of equity interests in CFO
Chongzhi;
    
    a purchase option agreement among CFO Software, CFO Chongzhi, Xun Zhao and Zhenfei Fan;
    
    voting arrangements with each of Xun Zhao and Zhenfei Fan regarding their voting rights in
CFO Shangtong; and
    
    a share pledge agreement among CFO Software, Xun Zhao and Zhenfei Fan.
 Contractual Arrangements with CFO Huifu and Its Individual Shareholders
  
    
    a strategic consulting service agreement between CFO Software and CFO Huifu;
    
    a technical support agreement between CFO Software and CFO Huifu;
    
    an operation agreement between CFO Software and CFO Huifu;
 71




---



##### Table of Contents




    
    a loan agreement with Shaoming Shi and Lin Yang. We entered into a loan agreement with
Shaoming Shi and Lin Yang to extend to each of them a loan in the amount of $49,835 and
$74,752, respectively, for the sole purpose of financing their acquisition of equity interests
in CFO Huifu;
    
    a purchase option agreement among CFO Software, CFO Huifu, Shaoming Shi and Lin Yang;
    
    voting arrangements with each of Shaoming Shi and Lin Yang regarding their voting rights in
CFO Huifu; and
    
    a share pledge agreement among CFO Software, Shaoming Shi and Lin Yang.
 Contractual Arrangements with CFO Zhongcheng and Its Individual Shareholders
  
    
    a strategic consulting service agreement between CFO Software and CFO Zhongcheng;
    
    a technical support agreement between CFO Software and CFO Zhongcheng;
    
    an operation agreement between CFO Software and CFO Zhongcheng;
    
    a loan agreement with Shaoming Shi and Lin Yang. We entered into a loan agreement with
Shaoming Shi and Lin Yang to extend to each of them a loan in the amount of $6,595 and
$124,587, respectively, for the sole purpose of financing their acquisition of equity
interests in CFO Huifu;
    
    a purchase option agreement among CFO Software, CFO Zhongcheng, Shaoming Shi and Lin Yang;
    
    voting arrangements with each of Shaoming Shi and Lin Yang regarding their voting rights in
CFO Zhongcheng; and
    
    a share pledge agreement among CFO Software, Shaoming Shi and Lin Yang.
 Contractual Arrangements with CFO Newrand
 Information and technology support agreement
 Loans to Lin Yang and Linghai Ma .
 72




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Purchase option agreement .
 2007 Equity Incentive Plan
  Other related party transactions
 Shareholders Agreement
     73




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
    
    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
  Dividend Policy
  B. Significant changes since December 31, 2007 .
  
 ITEM 9. THE OFFER AND LISTING
 A. Offering and listing details.
   74




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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
    
    
    
    4.53Year 2008
    
    
    26.15
    
    
    
    4.72Quarterly highs and lowsFirst Quarter 2007
    
    
    7.27
    
    
    
    4.53Second Quarter 2007
    
    
    10.18
    
    
    
    6.04Third Quarter 2007
    
    
    44.48
    
    
    
    8.17Fourth Quarter 2007
    
    
    47.68
    
    
    
    16.55First Quarter 2008
    
    
    22.43
    
    
    
    10.02Second Quarter 2008
    
    
    26.15
    
    
    
    13.90Third Quarter 2008
    
    
    18.75
    
    
    
    10.40Fourth Quarter 2008
    
    
    11.62
    
    
    
    4.72First Quarter 2009
    
    
    11.44
    
    
    
    6.97Monthly highs and lowsNovember 2008
    
    
    9.79
    
    
    
    4.72December 2008
    
    
    8.61
    
    
    
    6.30January 2009
    
    
    8.30
    
    
    
    6.97February 2009
    
    
    11.44
    
    
    
    8.10March 2009
    
    
    9.68
    
    
    
    7.61April 2009
    
    
    11.34
    
    
    
    9.17
 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.
 75




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##### Table of Contents



C. Material contracts.
  D. Exchange controls.
     E. Taxation.
 Hong Kong taxation
 Profits tax.
 76




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##### 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;
    
    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;
 77




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##### Table of Contents




    
    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
 Dividends on ADSs
    78




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Sales and other dispositions of ADSs
  Passive Foreign Investment Company
      79




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##### 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.
  G. Statement by experts.
 80




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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
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  81




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##### Table of Contents



Managements Annual Report on Internal Control over Financial Reporting
     Report of the Independent Registered Public Accounting Firm
      82




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##### 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
  For the Year Ended December 31,2008
    
    
    2007
    
    
    2006Audit Fees(1)
    
    US$
    735,000
    
    
    US$
    635,000
    
    
    US$
    257,000Tax Fees(2)
    
    
    119,737
    
    
    
    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. 83




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##### Table of Contents



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
Securities and Exchange Commission on October 4, 2004)2.1
    
    Specimen ordinary share certificate (incorporated by reference to Exhibit 4.1
from our Registration Statement on Form F-1 (File No. 333-119166) filed with the
Securities and Exchange Commission on September 21, 2004)2.2
    
    Specimen American depositary receipt of China Finance Online Co. Limited
(Incorporated by reference to the Registration Statement on Form F-6 (File No.
333-119530) filed with the Securities and Exchange Commission with respect to
American depositary shares representing ordinary shares on October 5, 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)
 84




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ExhibitNumber
    
    Description4.5
    
    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)4.8
    
    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)4.9
    
    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)4.10
    
    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)4.11
    
    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)4.12
    
    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)4.13
    
    Framework Agreement on Exercising Purchase Option dated October 18, 2007 by and
among China Finance Online Co. Limited, Wu Chen, Zhiwei Zhao, Jun Wang, CFO Fuhua
Innovation Technology Development Co., Ltd and China Finance Online (Beijing)
Co., Ltd. (incorporated by reference to Exhibit 4.15 from our 2007 Annual Report
on Form 20-F (File No.000-50975) filed with the Securities and Exchange
Commission on June 5, 2008)4.14
    
    Loan Agreement between China Finance Online Co. Limited and Jun Wang dated
October 18, 2007 (incorporated by reference to Exhibit 4.16 from our 2007 Annual
Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange
Commission on June 5, 2008)4.15
    
    Share Transfer Contract (related to shares of Beijing Fuhua Innovation Technology
Development Co., Ltd.) dated October 18, 2007 by and between Wu Chen and Jun Wang
(incorporated by reference to Exhibit 4.17 from our 2007 Annual Report on Form
20-F (File No.000-50975) filed with the Securities and Exchange Commission on
June 5, 2008)4.16
    
    Share Pledge Agreement dated October 18, 2007 among Zhiwei Zhao, Jun Wang, Fuhua
Innovation Technology Development Co., Ltd. and China Finance Online (Beijing)
Co., Ltd. (incorporated by reference to Exhibit 4.18 from our 2007 Annual Report
on Form 20-F (File No.000-50975) filed with the Securities and Exchange
Commission on June 5, 2008)4.17
    
    Purchase Option and Cooperation Agreement dated October 18, 2007 among China
Finance Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua Innovation
Technology
 85




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##### Table of Contents



ExhibitNumber
    
    DescriptionDevelopment Co., Ltd. (incorporated by reference to Exhibit 4.19 from
our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities
and Exchange Commission on June 5, 2008)4.18
    
    Purchase Option and Coopration Agreement dated March 3, 2008 among China Finance
Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua Innovation Technology
Development Co., Ltd. (incorporated by reference to Exhibit 4.20 from our 2007
Annual Report on Form 20-F (File No.000-50975) filed with the Securities and
Exchange Commission on June 5, 2008)4.19
    
    Capital Increase Agreement relating to CFO Fuhua Innovation Technology
Development Co., Ltd. dated March 3, 2008 among CFO Fuhua Innovation Technology
Development Co., Ltd. , Jun Wang and Zhiwei Zhao (incorporated by reference to
Exhibit 4.21 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed
with the Securities and Exchange Commission on June 5, 2008)4.20
    
    Loan Agreement dated March 3, 2008 among China Finance Online (Beijing) Co.,
Ltd., Jun Wang and Zhiwei Zhao (incorporated by reference to Exhibit 4.22 from
our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities
and Exchange Commission on June 5, 2008)4.21
    
    Share Pledge Agreement dated March 3,2008 among Zhiwei Zhao, Jun Wang, Fuhua
Innovation Technology Development Co., Ltd. and China Finance Online (Beijing)
Co., Ltd. (incorporated by reference to Exhibit 4.23 from our 2007 Annual Report
on Form 20-F (File No.000-50975) filed with the Securities and Exchange
Commission on June 5, 2008)4.22
    
    Loan Agreement dated August 21, 2007 among Fortune Software (Beijing) Co., Ltd.,
Wei Xiong and Zhenfei Fan (incorporated by reference to Exhibit 4.24 from our
2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and
Exchange Commission on June 5, 2008)4.23
    
    Operation Agreement among dated August 21, 2007 by and between Fortune Software
(Beijing) Co., Ltd. and Beijing CFO Premium Technology Co., Ltd.(incorporated by
reference to Exhibit 4.25 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.24
    
    Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and
Beijing CFO Premium Technology Co., Ltd. dated August 21, 2007 (incorporated by
reference to Exhibit 4.26 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.25
    
    Strategic Consulting and Service Agreement between Fortune Software (Beijing)
Co., Ltd. and Beijing Premium Technology Co., Ltd. dated August 21, 2007
(incorporated by reference to Exhibit 4.27 from our 2007 Annual Report on Form
20-F (File No.000-50975) filed with the Securities and Exchange Commission on
June 5, 2008)4.26
    
    Purchase Option Agreement dated August 21, 2007 among Fortune Software. Limited,
Wei Xiong, Zhenfei Fan and Beijing Premium Technology Co., Ltd. (incorporated by
reference to Exhibit 4.28 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.27
    
    Framework Agreement among Fortune Software (Beijing) Co., Ltd., Wu Chen, Jun Wang
and Beijing Glory Co., Ltd. dated September 10, 2007 (incorporated by reference
to Exhibit 4.29 from our 2007 Annual Report on Form 20-F (File No.000-50975)
filed with the Securities and Exchange Commission on June 5, 2008)4.28
    
    Loan Agreement dated September 1, 2007 among Fortune Software (Beijing) Co.,
Ltd., Wu Chen and Zhiwei Zhao (incorporated by reference to Exhibit 4.30 from our
2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and
Exchange Commission on June 5, 2008)4.29
    
    Share Transfer Contract (related to shares of Beijing Glory Co., Ltd.) dated
September 10, 2007 by and between Wu Chen and Jun Wang (incorporated by reference
to Exhibit 4.31 from our 2007 Annual Report on Form 20-F (File No.000-50975)
filed with the Securities and Exchange Commission on June 5, 2008)
 86




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ExhibitNumber
    
    Description4.30
    
    Operation Agreement among dated September 10, 2007 by and between Fortune
Software (Beijing) Co.,Ltd. and Beijing Glory Co., Ltd. (incorporated by
reference to Exhibit 4.32 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.31
    
    Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and
Beijing CFO Glory Co., Ltd. dated September 10, 2007 (incorporated by reference
to Exhibit 4.33 from our 2007 Annual Report on Form 20-F (File No.000-50975)
filed with the Securities and Exchange Commission on June 5, 2008)4.32
    
    Strategic Consulting and Service Agreement between Fortune Software (Beijing)
Co., Ltd. and Beijing Glory Co., Ltd. dated September 10, 2007 (incorporated by
reference to Exhibit 4.34 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.33
    
    Purchase Option Agreement dated September 10, 2007 among China Finance Online Co.
Limited, Jun Wang, Zhiwei Zhao and Beijing Glory Co., Ltd. (incorporated by
reference to Exhibit 4.3 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.34
    
    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)4.35
    
    License Agreement relating to the distribution of TopView between Fortune
Software (Beijing) Co., Ltd. and Shanghai Stock Exchange Information Network Co.,
Ltd. dated December 26, 2007 (incorporated by reference to Exhibit 4.37 from our
2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and
Exchange Commission on June 5, 2008)4.36 *
    
    Shenzhen Stock Exchange Proprietary Information License Agreement dated July 21,
2008 between Fortune Software (Beijing) Co., Ltd. and Shenzhen Securities
Information Co., Ltd.4.37
    
    Lease Contract for Housing Unit of Corporate Square dated August 9, 2007 between
Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited
(incorporated by reference to Exhibit 4.46 from our 2007 Annual Report on Form
20-F (File No.000-50975) filed with the Securities and Exchange Commission on
June 5, 2008)4.38
    
    Lease Contract for Housing Unit of Corporate Square dated August 9, 2007 between
Beijing Fuhua Innovation Technology Co., Ltd. and China Galaxy Securities Company
Limited (incorporated by reference to Exhibit 4.47 from our 2007 Annual Report on
Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission
on June 5, 2008)4.39
    
    Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between
China Finance Online (Beijing) Co., Ltd. and China Galaxy Securities Company
Limited (incorporated by reference to Exhibit 4.48 from our 2007 Annual Report on
Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission
on June 5, 2008)4.40
    
    Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between
Beijing Fuhua Innovation Technology Co., Ltd. and China Galaxy Securities Company
Limited (incorporated by reference to Exhibit 4.49 from our 2007 Annual Report on
Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission
on June 5, 2008)4.41
    
    Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between
Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited
(incorporated by reference to Exhibit 4.50 from our 2007 Annual Report on Form
20-F (File No.000-50975) filed with the Securities and Exchange Commission on
June 5, 2008)4.42
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among William Wang, FNG International Holdings
Limited and China Finance Online Co. Limited (incorporated by reference to
Exhibit 4.51 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed
with the Securities and Exchange Commission on June 5, 2008)
 87




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ExhibitNumber
    
    Description4.43
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among Tsang Kin-Woo, FNG International Holdings
Limited and China Finance Online Co., Limited (incorporated by reference to
Exhibit 4.52 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed
with the Securities and Exchange Commission on June 5, 2008)4.44
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among Wong Chan Miu-Wan Stella, FNG International
Holdings Limited and China Finance Online Co. Limited (incorporated by reference
to Exhibit 4.53 from our 2007 Annual Report on Form 20-F (File No.000-50975)
filed with the Securities and Exchange Commission on June 5, 2008)4.45
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among Shun Kin Enterprises Limited, FNG
International Holdings Limited and China Finance Online Co. Limited (incorporated
by reference to Exhibit 4.54 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.46
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among Midopa Enterprises Limited, FNG
International Holdings Limited and China Finance Online Co. Limited (incorporated
by reference to Exhibit 4.55 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.47
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among Hung Yung, FNG International Holdings
Limited and China Finance Online Co. Limited (incorporated by reference to
Exhibit 4.56 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed
with the Securities and Exchange Commission on June 5, 2008)4.48
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among Chu Ping-Im, FNG International Holdings
Limited and China Finance Online Co. Limited (incorporated by reference to
Exhibit 4.57 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed
with the Securities and Exchange Commission on June 5, 2008)4.49
    
    Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company
Limited dated September 7, 2007 among Eternal Growth Investment Limited, FNG
International Holdings Limited and China Finance Online Co. Limited (incorporated
by reference to Exhibit 4.58 from our 2007 Annual Report on Form 20-F (File
No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)4.50
    
    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)4.51
    
    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)4.52
    
    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)4.53
    
    [Intentionally Omitted]4.54
    
    [Intentionally Omitted]4.55 *
    
    Form of Amended Change in Control Agreement dated October 15, 20084.56
    
    Engagement Letter between China Finance Online Co., Ltd. and Deloitte Touche
Tohmatsu CPA. Ltd dated February 26, 2008 (incorporated by reference to Exhibit
4.67 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the
Securities and Exchange Commission on June 5, 2008)
 88




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ExhibitNumber
    
    Description4.57 *
    
    Loan Agreement dated May 8, 2008 among Fortune Software (Beijing) Co., Ltd., Lin
Yang and Shaoming Shi4.58 *
    
    Operation Agreement dated June 8, 2008 between Fortune Software (Beijing) Co.,
Ltd. and Shanghai Shangtong Information Technology Co., Ltd.4.59 *
    
    Technical Support Agreement dated June 8, 2008 between Fortune Software (Beijing)
Co., Ltd. and Shanghai Shangtong Information Technology Co., Ltd.4.60 *
    
    Strategic Consulting Service Agreement dated June 8, 2008 between Fortune
Software (Beijing) Co., Ltd. and Shanghai Shangtong Information Technology Co.,
Ltd.4.61 *
    
    Purchase Option and Cooperation Agreement dated June 8, 2008 among Fortune
Software(Beijing) Co., Ltd., Lin Yang, Shaoming Shi and Shanghai Shangtong
Information Technology Co., Ltd.4.62 *
    
    Share Pledge Agreement dated June 8, 2008 among Lin Yang, Shaoming Shi and
Fortune Software(Beijing) Co., Ltd.4.63 *
    
    Loan Agreement dated May 8, 2008 among Fortune Software (Beijing) Co., Ltd.,
Zhenfei Fan and Xun Zhao4.64 *
    
    Operation Agreement dated June 8, 2008 between Fortune Software (Beijing) Co.,
Ltd. and Shanghai Chongzhi Information Technology Co., Ltd.4.65 *
    
    Technical Support Agreement dated June 8, 2008 between Fortune Software (Beijing)
Co., Ltd. and Shanghai Chongzhi Information Technology Co., Ltd.4.66 *
    
    Strategic Consulting Service Agreement dated June 8, 2008 between Fortune
Software (Beijing) Co., Ltd. and Shanghai Chongzhi Information Technology Co.,
Ltd.4.67 *
    
    Purchase Option and Cooperation Agreement dated June 8, 2008 among Fortune
Software(Beijing) Co., Ltd., Zhenfei Fan, Xun Zhao and Shanghai Chongzhi
Information Technology Co., Ltd.4.68 *
    
    Share Pledge Agreement dated June 8, 2008 among Zhenfei Fan, Xun Zhao and Fortune
Software(Beijing) Co., Ltd.4.69 *
    
    Loan Agreement dated August 21, 2008 among Fortune Software (Beijing) Co., Ltd.,
Shaoming Shi and Lin Yang4.70 *
    
    Operation Agreement dated October 15, 2008 by and between Fortune Software
(Beijing) Co., Ltd. and Beijing Tongxinshengshi Environment Engineering Co., Ltd.4.71 *
    
    Technical Support Agreement dated October 15, 2008 between Fortune Software
(Beijing) Co., Ltd. and Beijing Tongxinshengshi Environment Engineering Co., Ltd.4.72 *
    
    Strategic Consulting Service Agreement dated October 15, 2008 between Fortune
Software (Beijing) Co., Ltd. and Beijing Tongxinshengshi Environment Engineering
Co., Ltd.4.73 *
    
    Purchase Option Agreement dated October 15, 2008 among Fortune Software(Beijing)
Co., Ltd., Shaoming Shi, Lin Yang and Beijing Tongxinshengshi Environment
Engineering Co., Ltd.4.74 *
    
    Share Transfer Agreement dated August 19, 2008 among Lin Yang, Shaoming Shi, Xin
Wang and Zhihua Yang4.75 *
    
    Loan Agreement dated August 21, 2008 among Fortune Software (Beijing) Co., Ltd.,
Shaoming Shi and Lin Yang4.76 *
    
    Operation Agreement dated October 15, 2008 by and between Fortune Software
(Beijing) Co., Ltd. and Wisdom Door (Beijing) International Culture Spread Co.,
Ltd.4.77 *
    
    Technical Support Agreement dated October 15, 2008 by and between Fortune
Software (Beijing) Co., Ltd. and Wisdom Door (Beijing) International Culture
Spread Co., Ltd.4.78 *
    
    Strategic Consulting Service Agreement dated October 15, 2008 between Fortune
Software (Beijing) Co., Ltd. and Wisdom Door (Beijing) International Culture
Spread Co., Ltd.4.79 *
    
    Purchase Option Agreement dated October 15, 2008 among Fortune Software(Beijing)
Co., Ltd., Shaoming Shi, Lin Yang and Wisdom Door (Beijing) International Culture
Spread Co., Ltd.
 89




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ExhibitNumber
    
    Description4.80 *
    
    Share Transfer Agreement dated September 25, 2008 among Lin Yang, Shaoming Shi,
Yiming Li and Xu Wang4.81 *
    
    Loan Agreement dated October 17, 2008 between Fortune Software (Beijing) Co.,
Ltd.and Lin Yang4.82 *
    
    Loan Agreement dated October 17, 2008 among Fortune Software (Beijing) Co., Ltd.,
Fortune (Beijing) Success Technology Co., Ltd. and Linghaima4.83 *
    
    Purchase Option Agreement dated October 17, 2008 among Fortune Software (Beijing)
Co., Ltd., Shenzhen Newland Securities Investment and Advisory Co., Ltd. and Lin
Yang4.84 *
    
    Purchase Option Agreement dated October 17, 2008 among Fortune Software (Beijing)
Co., Ltd., Fortune (Beijing) Success Technology Co., Ltd., Shenzhen Newland
Securities Investment and Advisory Co., Ltd. and Linghai Ma4.85 *
    
    Share Transfer Agreement dated September 16, 2008 among Linhai Ma, Lin Yang,
Shenzhen Guoxuan Capital Holding Co., Ltd., Labor Union Committee of Shenzhen
Newland Securites Investment Advisory Co., Ltd., Zhaowen Li and Shiqin Wang4.86 *
    
    Securities Investment and Consultancy Information and Technical Support Agreement
dated October 17, 2008 between Shenzhen Newland Securities Investment and
Advisory Co., Ltd. and Fortune (Beijing) Success Technology Co., Ltd.4.87 *
    
    Securities Investment and Consultancy Information and Technical Support Agreement
dated October 17, 2008 between Shenzhen Newland Securities Investment and
Advisory Co., Ltd. and Fortune Software (Beijing) Co., Ltd.4.88 *
    
    Securities Investment and Consultancy Information and Technical Support Agreement
dated October 17, 2008 between Shenzhen Newland Securities Investment and
Advisory Co., Ltd. and Fortune (Beijing) Wisdom Technology Co., Ltd.4.89 *
    
    Securities Investment and Consultancy Information and Technical Support Agreement
dated October 17, 2008 between Shenzhen Newland Securities Investment and
Advisory Co., Ltd. and Beijing Fuhua Innovation Technology Development Co., Ltd.4.90 *
    
    Securities Investment and Consultancy Information and Technical Support Agreement
dated October 17, 2008 between Shenzhen Newland Securities Investment and
Advisory Co., Ltd. and Shanghai Meining Computer Software Co., Ltd.4.91 *
    
    Securities Investment and Consultancy Information and Technical Support Agreement
dated October 17, 2008 between Shenzhen Newland Securities Investment and
Advisory Co., Ltd. and Zhengning Information & Technology (Shanghai) Co., Ltd.4.92 *
    
    Loan Agreement dated January 21, 2009 among Fortune Software (Beijing) Co., Ltd.,
Yang Yang and Zhenfei Fan4.93 *
    
    Purchase Option Agreement dated January 21, 2009 among Fortune Software (Beijing)
Co., Ltd., Yang Yang, Zhenfei Fan and Guangzhou Boxin Investment Advisory Co.,
Ltd.4.94 *
    
    Share Transfer Agreement dated February 10, 2009 among Raojian Chen, Jiansheng
Zhou, Guihua Gao, Zhenfei Fan and Yang Yang4.95 *
    
    Lease Contract dated May 16, 2008 between Fortune Software (Beijing) Co., Ltd.
and Shifeng Li4.96 *
    
    Lease Contract dated January 10, 2008 between Shanghai Lushi Food Co., Ltd. and
Shanghai Meining Computer Software Co., Ltd.4.97 *
    
    Lease Contract dated January 10, 2008 between Beijing Jintai Hengye Co.,Ltd.
House Lease Branch and Beijing Glory Co., Ltd.4.98 *
    
    Lease Contract dated January 10, 2008 between Beijing Jintai Hengye Co.,Ltd.
House Lease Branch and Beijing Premium Technology Co.,Ltd.4.99 *
    
    Lease Contract dated April 10, 2008 between Shenzhen Zhiguangda Industrial
Development Co., Ltd. and Shenzhen Genius Information Technology Co., Ltd.
 90




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ExhibitNumber
    
    Description4.100 *
    
    Entrusted Loan Contract dated May 7, 2008 among Fortune (Beijing) Success
Technology Co., Ltd., Beijing Glory Co., Ltd. and China Bohai Bank Co., Ltd.
Beijing Branch4.101 *
    
    Entrusted Loan Contract dated December 11, 2007 among Beijing Glory Co., Ltd.,
Fortune Software (Beijing) Co., Ltd. and China Construction Bank4.102 *
    
    Entrusted Loan Contract dated April 11, 2008 between Beijing Premium Technology
Co., Ltd., Zhengning Information Technology (Shanghai) Co., Ltd. and China
Construction Bank Corporation4.103 *
    
    Issuer Information Feed Service Agreement dated February 13, 2009 between HKEx
Information Service Limited and Fortune Software (Beijing) Co., Ltd.8.1 *
    
    List of subsidiaries12.1 *
    
    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 200215.1 *
    
    Consent of Deloitte Touche Tohmatsu CPA Ltd.15.2 *
    
    Written Consent of American
Appraisal China Limited
 91




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##### Table of Contents



CHINA FINANCE ONLINE CO. LIMITED
 SIGNATURE
  Date: May 21, 2009
    CHINA FINANCE ONLINE CO. LIMITED/s/ Jeff WangName:
    Jeff WangTitle:
    Chief Financial Officer 92




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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, 2007 AND 2008
    
    F-3CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
    
    F-4CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
    
    F-5CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
    
    F-6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    F-7SCHEDULE 1
    
    F-53
 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 31,2007
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    74,729,033
    
    
    $
    97,544,219Prepaid expenses and other current assets
    
    
    2,947,054
    
    
    
    8,581,415Trust bank balances held on behalf of customers
    
    
    2,850,541
    
    
    
    2,010,339Accounts receivable, net of allowance for doubtful
accounts of USD10,550 and USD31,466 in 2007 and 2008, respectively
    
    
    1,491,454
    
    
    
    2,875,548Advances to employees
    
    
    1,672,575
    
    
    
    160,837Deferred tax assets
    
    
    1,129,515
    
    
    
    2,525,523Total current assets
    
    
    84,820,172
    
    
    
    113,697,881Property and equipment, net
    
    
    5,454,858
    
    
    
    8,588,691Acquired intangible assets, net
    
    
    1,938,177
    
    
    
    3,473,116Cost method investment
    
    
    1,479,571
    
    
    
    1,479,571Rental deposits
    
    
    500,222
    
    
    
    592,048Goodwill
    
    
    9,651,719
    
    
    
    12,018,512Other assets
    
    
    25,647
    
    
    
    219,358Deferred tax assets, non-current
    
    
    14,382
    
    
    
    1,754,134Total assets
    
    $
    103,884,748
    
    
    $
    141,823,311Liabilities and shareholders equityCurrent liabilities:Deferred revenue
    
    $
    20,457,316
    
    
    $
    28,202,139Accrued expenses and other current liabilities
    
    
    6,950,254
    
    
    
    4,895,859Amounts due to customers for the trust bank balances held on their behalf
    
    
    2,850,541
    
    
    
    2,010,339Accounts payable
    
    
    763,458
    
    
    
    221,574Income taxes payable
    
    
    11,968
    
    
    
    142,103Total current liabilities
    
    
    31,033,537
    
    
    
    35,472,014Deferred revenue, non-current
    
    
    4,665,112
    
    
    
    8,786,143Deferred tax liabilities, non-current
    
    
    352,273
    
    
    
    622,799Total liabilities
    
    
    36,050,922
    
    
    
    44,880,956Commitments (Note 16)Minority interests
    
    
    471,431
    
    
    
    Shareholders equity:Ordinary shares ($0.00013 par value; 500,000,000 shares authorized; shares
issued and outstanding 109,754,433 in 2007 and 110,014,433 in 2008)
    
    
    14,172
    
    
    
    14,206Additional paid-in capital
    
    
    58,727,378
    
    
    
    67,340,543Accumulated other comprehensive income
    
    
    4,501,432
    
    
    
    6,448,078Retained earnings
    
    
    4,119,413
    
    
    
    23,139,528Total shareholders equity
    
    
    67,362,395
    
    
    
    96,942,355Total liabilities, minority interests and shareholders equity
    
    $
    103,884,748
    
    
    $
    141,823,311
  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 31,2006
    
    
    2007
    
    
    2008Net revenues
    
    $
    7,128,078
    
    
    $
    25,903,074
    
    
    $
    56,242,768Cost of revenues (including stock-based compensation
of $111,612, $16,192 and $nil for 2006, 2007, 2008,
respectively)
    
    
    1,467,745
    
    
    
    4,426,602
    
    
    
    9,367,143Gross profit
    
    
    5,660,333
    
    
    
    21,476,472
    
    
    
    46,875,625Operating expenses:General and administrative (including stock-based
compensation of $833,685, $2,667,613 and $7,767,874
for 2006, 2007, 2008, respectively)
    
    
    2,955,948
    
    
    
    7,783,668
    
    
    
    15,371,171Product development (including stock-based
compensation of $131,134, $123,461 and $59,200 for
2006, 2007, 2008, respectively)
    
    
    742,728
    
    
    
    2,268,878
    
    
    
    5,635,173Sales and marketing (including stock-based compensation
of $107,231, $139,074 and $213,076
for 2006, 2007, 2008, respectively)
    
    
    2,665,847
    
    
    
    6,924,336
    
    
    
    13,520,295Total operating expenses
    
    
    6,364,523
    
    
    
    16,976,882
    
    
    
    34,526,639Government subsidies
    
    
    
    
    
    
    135,834
    
    
    
    436,946Income (loss) from operations
    
    
    (704,190
    )
    
    
    4,635,424
    
    
    
    12,785,932Interest income
    
    
    1,002,975
    
    
    
    1,104,701
    
    
    
    1,609,112Exchange gain
    
    
    267,302
    
    
    
    424,338
    
    
    
    1,489,076Other income (expense), net
    
    
    114,573
    
    
    
    8,731
    
    
    
    (168,536
    )Loss from impairment of cost method investment
    
    
    (1,322,000
    )
    
    
    (11,127,000
    )
    
    
    Income (loss) before income tax benefit
    
    
    (641,340
    )
    
    
    (4,953,806
    )
    
    
    15,715,584Income tax benefit
    
    
    40,707
    
    
    
    808,625
    
    
    
    3,047,129Purchased pre-acquisition earning
    
    
    
    
    
    
    
    
    
    
    226,769Minority interest in net loss of consolidated subsidiary
    
    
    
    
    
    
    15,477
    
    
    
    30,633Net income (loss)
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )
    
    $
    19,020,115Income (loss) per shareBasic
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.19Diluted
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.17Weighted average shares used in calculating
net income (loss) per shareBasic
    
    
    93,650,653
    
    
    
    94,500,529
    
    
    
    98,957,993Diluted
    
    
    93,650,653
    
    
    
    94,500,529
    
    
    
    112,984,532
  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)
 Accumulated otherAdditional
    
    
    comprehensive
    
    
    
    
    
    
    TotalOrdinary shares
    
    
    paid-in
    
    
    income
    
    
    Retained
    
    
    shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    capital
    
    
    (loss)
    
    
    earnings
    
    
    equity
    
    
    incomeBalance as of January 1, 2006
    
    
    101,329,933
    
    
    
    13,077
    
    
    
    51,297,011
    
    
    
    671,122
    
    
    
    8,849,750
    
    
    
    60,830,960
    
    
    $
    5,295,320Issuance of ordinary shares for exercise of
share 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 share 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
    )Exercise of share option by employees
    
    
    
    
    
    
    
    
    
    
    531,449
    
    
    
    
    
    
    
    
    
    
    
    531,449Exercise of share options by non-employees
    
    
    260,000
    
    
    
    34
    
    
    
    41,566
    
    
    
    
    
    
    
    
    
    
    
    41,600Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8,040,150
    
    
    
    
    
    
    
    
    
    
    
    8,040,150Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,946,646
    
    
    
    
    
    
    
    1,946,646
    
    
    $
    1,946,646Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,020,115
    
    
    
    19,020,115
    
    
    
    19,020,115Balance as of December 31, 2008
    
    
    110,014,433
    
    
    $
    14,206
    
    
    $
    67,340,543
    
    
    $
    6,448,078
    
    
    $
    23,139,528
    
    
    $
    96,942,355
    
    
    $
    20,966,761
  F-5




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)
 Years ended December 31,2006
    
    
    2007
    
    
    2008Operating activities:Net income (loss)
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )
    
    $
    19,020,115Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Stock-based compensation
    
    
    1,183,662
    
    
    
    2,946,340
    
    
    
    8,040,150Depreciation and amortization
    
    
    301,941
    
    
    
    973,953
    
    
    
    2,139,145Deferred taxes
    
    
    (40,081
    )
    
    
    (737,712
    )
    
    
    (3,200,390
    )Loss on disposal of property and equipment
    
    
    
    
    
    
    84,796
    
    
    
    37,659Loss from impairment of cost method investment
    
    
    1,322,000
    
    
    
    11,127,000
    
    
    
    Gain from disposal of cost method investment
    
    
    (116,071
    )
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    (15,477
    )
    
    
    (30,633
    )Purchased pre-acquisition earning
    
    
    
    
    
    
    
    
    
    
    (226,769
    )Changes in assets and liabilities:Accounts receivable
    
    
    122,363
    
    
    
    37,377
    
    
    
    (1,292,386
    )Prepaid expenses and other current assets
    
    
    334,687
    
    
    
    (1,786,912
    )
    
    
    (5,567,706
    )Advances to employees
    
    
    
    
    
    
    (1,672,575
    )
    
    
    1,597,941Trust bank balances held on behalf of customers
    
    
    
    
    
    
    (465,101
    )
    
    
    854,063Rental deposits
    
    
    (31,955
    )
    
    
    (403,912
    )
    
    
    (74,487
    )Deferred revenue
    
    
    3,840,892
    
    
    
    17,509,161
    
    
    
    9,943,656Account payable
    
    
    
    
    
    
    (30,297
    )
    
    
    (182,528
    )Accrued expenses and other current liabilities
    
    
    (388,662
    )
    
    
    4,566,829
    
    
    
    (2,482,122
    )Amounts due to customers for the trust bank balance
held on their behalf
    
    
    
    
    
    
    465,101
    
    
    
    (854,063
    )Income taxes payable
    
    
    (36,041
    )
    
    
    (43,267
    )
    
    
    126,961Net cash provided by operating activities
    
    
    5,892,102
    
    
    
    28,425,600
    
    
    
    27,848,606Investing activities:Purchase of property and equipment
    
    
    (1,042,423
    )
    
    
    (3,836,412
    )
    
    
    (5,006,365
    )Acquisition of businesses (net of cash acquired of
$828,494, $2,631,008 and $1,521,109 for the years ended
December 31, 2006, 2007, and 2008, respectively),
    
    
    (8,346,856
    )
    
    
    (993,845
    )
    
    
    (2,403,620
    )Proceeds from partial sale of cost method investment
    
    
    1,187,500
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (8,201,779
    )
    
    
    (4,830,257
    )
    
    
    (7,409,985
    )Financing activities:Proceeds from stock options exercised by employees
    
    
    66,843
    
    
    
    2,366,697
    
    
    
    531,449Proceeds from exercise of options granted to non-employee
    
    
    8,800
    
    
    
    859,120
    
    
    
    41,600Net cash provided by financing activities
    
    
    75,643
    
    
    
    3,225,817
    
    
    
    573,049Effect of exchange rate changes
    
    
    1,021,202
    
    
    
    2,952,320
    
    
    
    1,803,516Net (decrease) increase in cash and cash equivalents
    
    
    (1,212,832
    )
    
    
    29,773,480
    
    
    
    22,815,186Cash and cash equivalents, beginning of year
    
    
    46,168,385
    
    
    
    44,955,553
    
    
    
    74,729,033Cash and cash equivalents, end of year
    
    
    44,955,553
    
    
    
    74,729,033
    
    
    
    97,544,219Supplemental disclosure of cash flow informationIncome taxes paid
    
    $
    36,089
    
    
    $
    38,761
    
    
    $
    169,270
  F-6




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIESChina Finance Online Co. Limited (China Finance Online or the Company) was incorporated
in Hong Kong on November 2, 1998. China Finance Online and its subsidiaries including its
variable interest entities (collectively, the Group) are principally engaged in the sale
of online financial services analyzing financial and listed company information in the
Peoples Republic of China (PRC). The services are provided through proprietary research
tools on their website www.jrj.com and www.stockstar.com.Details of China Finance Onlines subsidiaries and variable interest entities as of December
31, 2008 were as follows:
 Place of
    
    Date of
    
    Beneficialincorporation or
    
    incorporation or
    
    ownership
    
    PrincipalCompany name
    
    establishment
    
    establishment
    
    interest
    
    activitySubsidiaries:China Finance Online (Beijing) Co., Ltd. (CFO Beijing)
    
    Beijing, PRC
    
    Jul.9, 1998
    
    
    100
    %
    
    Subscription serviceFortune Software (Beijing) Co., Ltd. (CFO Software)
    
    Beijing, PRC
    
    Dec.7, 2004
    
    
    100
    %
    
    Subscription serviceFortune (Beijing) Wisdom Technology Co., Ltd. (CFO Wisdom)
    
    Beijing, PRC
    
    Oct.16, 2007
    
    
    100
    %
    
    Subscription serviceFortune (Beijing) Success Technology Co., Ltd. (CFO Success)
    
    Beijing, PRC
    
    Oct.16, 2007
    
    
    100
    %
    
    Subscription serviceShenzhen Genius Information Technology Co., Ltd. (CFO Genius) (Note 3)
    
    Shenzhen, PRC
    
    Sep.21, 2006
    
    
    100
    %
    
    Database subscriptionJujin Software (Shenzhen) Co., Ltd. (CFO Jujin)
    
    Shenzhen, PRC
    
    Mar.9, 2007
    
    
    100
    %
    
    Subscription serviceJuda Software (Shenzhen) Co., Ltd. (CFO Juda)
    
    Shenzhen, PRC
    
    Nov.  11, 2008
    
    
    100
    %
    
    Subscription serviceStockstar Information Technology (Shanghai) Co., Ltd. (CFO Stockstar)
(Note 3)
    
    Shanghai, PRC
    
    Oct.1, 2006
    
    
    100
    %
    
    Subscription serviceZhengning Information & Technology (Shanghai) Co., Ltd. (CFO Zhengning)
    
    Shanghai, PRC
    
    Jan.31, 2007
    
    
    100
    %
    
    Subscription serviceZhengtong Information Technology (Shanghai) Co., Ltd (CFO Zhengtong)
    
    Shanghai, PRC
    
    Jun. 26, 2008
    
    
    100
    %
    
    N/AZhengyong Information Technology (Shanghai) Co., Ltd (CFO Zhengyong)
    
    Shanghai, PRC
    
    Jun. 24, 2008
    
    
    100
    %
    
    N/ADaily Growth Financial Holdings Limited (CFO DG Holdings))
    
    BVI
    
    Jul.16, 2007
    
    
    100
    %
    
    Investment HoldingsGiant Bright International Holdings Limited (CFO Giant Bright)
    
    BVI
    
    Jul.16, 2007
    
    
    100
    %
    
    N/AMount First Investments Limited (CFO Mount First)
    
    BVI
    
    Jul.23, 2007
    
    
    100
    %
    
    N/AMainfame Group Limited (CFO Mainfame)
    
    BVI
    
    Jan. 2, 2008
    
    
    100
    %
    
    N/AManca Development (CFO Manca)
    
    BVI
    
    Jan. 3, 2008
    
    
    100
    %
    
    N/ATeam Gear Limited (CFO Team Gear)
    
    Hong Kong, PRC
    
    Oct.22, 2007
    
    
    100
    %
    
    N/AKinco Limited (CFO Kinco)
    
    Hong Kong, PRC
    
    Oct.22, 2007
    
    
    100
    %
    
    N/ADanford (H.K) Limited (CFO Danford)
    
    Hong Kong, PRC
    
    Nov.30, 2007
    
    
    100
    %
    
    N/AKingford International Limited (CFO Kingford)
    
    Hong Kong, PRC
    
    Feb. 11, 2008
    
    
    100
    %
    
    N/AAsiaciti (H.K.) Limited (CFO Asiaciti)
    
    Hong Kong, PRC
    
    Feb. 11, 2008
    
    
    100
    %
    
    N/ADaily Growth Securities Limited (CFO Daily Growth) (Note 3)
    
    Hong Kong, PRC
    
    Nov.23, 2007
    
    
    100
    %
    
    Brokerage serviceDaily Growth Futures Limited (CFO DG Futures)
    
    Hong Kong, PRC
    
    Apr. 16, 2008
    
    
    100
    %
    
    Brokerage serviceDaily Growth Wealth Management Limited (CFO DG Wealth Management)
    
    Hong Kong, PRC
    
    Oct. 8, 2008
    
    
    100
    %
    
    ConsultingVariable interest entities:Beijing Fuhua Innovation Technology Investment Co., Ltd. (CFO Fuhua)
    
    Beijing, PRC
    
    Dec.31, 2000
    
    
    100
    %
    
    Advertising serviceShanghai Shangtong Co., Ltd. (CFO Shangtong)
    
    Shanghai, PRC
    
    Jun. 6, 2008
    
    
    100
    %
    
    N/AShanghai Chongzhi Co., Ltd., (CFO Chongzhi)
    
    Shanghai, PRC
    
    Jun. 6, 2008
    
    
    100
    %
    
    Subscription serviceBeijing Premium Technology Co., Ltd. (CFO Premium)
    
    Beijing, PRC
    
    Aug.31, 2007
    
    
    100
    %
    
    N/ABeijing Glory Technology Co., Ltd. (CFO Glory)
    
    Beijing, PRC
    
    Sep.11, 2007
    
    
    100
    %
    
    N/AHuifu Jinyuan Co., Ltd. (CFO Huifu) (Note 3)
    
    Beijing, PRC
    
    Oct. 31, 2008
    
    
    100
    %
    
    N/AZhongcheng Futong Co., Ltd. (CFO Zhongcheng) (Note 3)
    
    Beijing, PRC
    
    Oct. 31, 2008
    
    
    100
    %
    
    N/AShenzhen Newrand Securities Advisory and Investment Co., Ltd.
(CFO Newrand )*(Note 3)
    
    Shenzhen, PRC
    
    Oct. 17, 2008
    
    
    100
    %
    
    Consulting and trainingSubsidiary of variable interest entities:Shanghai Meining Computer Software Co., Ltd. (CFO Meining) (Note 3)
    
    Shanghai, PRC
    
    Oct.1, 2006
    
    
    100
    %
    
    Advertising and SMSShenzhen Newrand Securities Training Center
(CFO Newrand Training) (Note 3)
    
    Shenzhen, PRC
    
    Oct. 17, 2008
    
    
    100
    %
    
    Training
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIES  continuedPRC regulations prohibit direct foreign ownership of business entities providing certain
services in PRC, such as internet content service. China Finance Online and its wholly
owned subsidiaries, CFO Beijing and CFO software are foreign or foreign invested enterprise
under PRC law and accordingly are ineligible for certain operations. In order to comply
with these regulations, the Group established CFO Fuhua, CFO Premium, CFO Glory, CFO
Chongzhi and CFO Shangtong, five variable interest entities (VIE), as VIE is defined by
the Financial Accounting Standards Board (FASB) Interpretation No. 46 (revised) (FIN
46(R)) through designated equity owners who are PRC citizens and legally own the VIEs. In
2008, the Group also acquired three VIEs, CFO Zhongcheng, CFO Huifu and CFO Newrand through
a series of contractual arrangements (see Note 3).CFO FuhuaIn 2000, the Company established CFO Fuhua, through two equity owners who are PRC citizens
designated by the Company and legally own CFO Fuhua.In 2004, China Finance Online signed a series of agreements with CFO Fuhua and its
shareholders that provide the Group with the substantial ability to control CFO Fuhua.
Pursuant to these contractual arrangements with CFO Fuhua, China Finance Online provides
equipment, services and a domain name license to CFO Fuhua in exchange for fees. China
Finance Online has the right to determine the amount of these fee and they are intended to
transfer substantially all of the economic benefits of CFO Fuhua to the Company. The
principal equipment lease, services and domain name license agreements that the Group has
entered into with CFO Fuhua include:
 
    
    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.
 As a result of a Ministry of Information Industry circular issued in 2006 regulating among
other things the ownership of domain names by foreign invested value-added telcommunications
businesses (including Internet and wireless content providers), China Finance Online and CFO
Beijing transferred ownership of the domain names, www.jrj.com and www.jrj.com.cn, to CFO
Fuhua and terminated its licensing arrangements regarding www.jrj.com.cn.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIES  continuedCFO Fuhua  continuedChina Finance Online has the right to determine the amount of these fees and they are
intended to transfer substantially all of the economic benefits of CFO Fuhua to the Company.In addition, China Finance Online has entered into agreements with CFO Fuhua and its
shareholders that provide CFO Beijing with the substantial ability to control CFO Fuhua.
Pursuant to these contractual arrangements:
 
    
    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;
    
    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.
 Each of the contractual arrangement with CFO Fuhua and its shareholders can only be amended
with the approval of our audit committee or another independent body of China Finance
Onlines board of directors.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIES  continuedCFO Fuhua  continuedChina Finance Online made a loan to each of two owners of CFO Fuhua solely for the purposes
of capitalizing CFO Fuhua. Pursuant to the loan agreements, these loans can only be repaid
by transferring all of their interests in CFO Fuhua to China Finance Online or a third party
designated by China Finance Online. While Hong Kong law limits the maximum interest payment
chargeable under a loan to 60% of the outstanding principal amount per annum, China Finance
Online does not believe this limitation will have a material adverse effect on its business
and operations, or will result in a material amount being paid to the shareholders of CFO
Fuhua if and when they are permitted to transfer their interests in CFO Fuhua to China
Finance Online. China Finance Online does not regard the shareholders of CFO Fuhua as
having any interest in CFO Fuhua.China Finance Online made a loan to CFO Fuhau in 2006 to finance its acquisition of
RMB12,000,000.In April 2008, the CEO, who is the designated owner of CFO Fuhua, injected further capital
of $1,020,542 (equivalent to RMB7,000,000) which was loaned by CFO Beijing.CFO Premium, CFO Glory, CFO Shangtong, CFO Chongzhi, CFO Huifu, CFO Zhongcheng and CFO
NewrandIn August and September 2007, the Group established CFO Premium and CFO Glory through equity
owners who are PRC citizens designated by the Company and own CFO Premium and CFO Glory.In June 2008, the Group established CFO Shangtong and CFO Chongzhi through equity owners who
are PRC citizens designated by the Group and own CFO Shangtong and CFO Chongzhi.In August and September of 2008, the Group acquired CFO Huifu and CFO Zhongcheng through
equity owners who are PRC citizens designated by the Group and own CFO Huifu and CFO
Zhongcheng (note 3).In October 2008, the Group acquired CFO Newrand through equity owners who are PRC citizens
designated by the Group and own CFO Newrand (note 3).
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIES  continuedCFO Premium, CFO Glory, CFO Shangtong, CFO Chongzhi, CFO Huifu, CFO Zhongcheng and CFO
Newrand  continuedCFO Software has entered into a series of contractual arrangements with CFO Premium, CFO
Glory, CFO Shangtong, CFO Chongzhi, CFO Huifu, CFO Zhongcheng and CFO Newrand (the seven
VIEs) and their individual shareholders, respectively, which provide CFO Software with the
substantial ability to control the seven VIEs. Pursuant to these similar contractual
arrangements, CFO Software provides services to the seven VIEs in exchange for fees. The
principal services agreements that CFO Software has entered into with the seven VIEs
include:
 
    
    strategic consulting services agreement, pursuant to which the amount of the fee to
be charged is 30% of each of the seven VIEs income before tax;
    
    technical support services agreement, pursuant to which the amount of the fee to be
charged is 30% of each of the seven VIEs income before tax;
    
    operating support services agreement, pursuant to which the amount of the fee to be
charged is 40% of each of the seven VIEs income before tax;
 CFO Software has the right to receive substantially all of the economic benefits of the
seven VIEs to the Group.In addition, CFO Software has entered into agreements with the seven VIEs and their
shareholders that provide CFO Software with the substantial ability to control the seven
VIEs. Pursuant to these contractual arrangements:
 
    
    the shareholders of the seven VIEs have granted CFO Software or individuals
designated by CFO Software an irrevocable proxy to exercise all their voting rights as
shareholders of the seven VIEs, including the right to appoint directors, the general
manager and other senior management of the seven VIEs;
    
    the seven VIEs will not enter into any transaction that may materially affect its
assets, liabilities, equity or operations without CFO Softwares prior written consent;
    
    the seven VIEs will not distribute any dividends;
    
    CFO Software may purchase the entire equity interest in, or all the assets of the
seven VIEs at a price equal to the total principal amount of the loan lent by the
Group to the owners of the seven VIEs when and if such purchase is permitted by PRC
law or the current shareholders of the seven VIEs cease to be directors or employees of
the seven VIEs;
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIES  continuedCFO Premium, CFO Glory, CFO Shangtong, CFO Chongzhi, CFO Huifu, CFO Zhongcheng and CFO
Newrand continued
 
    
    the shareholders of the seven VIEs will not transfer, sell, pledge, dispose of or
create any encumbrance on their equity interest in the seven VIEs without the prior
written consent of CFO Software.
 CFO Software also made loans to the shareholders of the seven VIEs solely for the purposes
of capitalizing the seven VIEs, respectively. Pursuant to the loan agreements, these loans
can only be repaid by transferring all of their interests in the seven VIEs to CFO Software
or a third party designated by CFO Software.Through the contractual agreements described above, CFO Fuhua, CFO Premium, CFO Glory CFO
Shangtong, CFO Chongzhi, CFO Huifu, CFO Zhongcheng and CFO Newrand are VIEs in accordance
with FIN 46R because the equity owners (1) lack the right to receive the expected residual
returns of the VIEs, (2) lack the ability to make decisions about the VIEs activities that
have a significant effect on their success, and (3) substantially all of the VIEs
businesses are conducted on behalf of the Group. The Group is the primary beneficiary of
the VIEs because it holds all the variable interests in the VIEs. As a result, the accounts
and operations of the VIEs are included in the accompanying consolidated financial
statements effective as of the date of the above agreements.The VIEs and the following financial statement amounts and balances were included in the
accompanying consolidated financial statements as of and for the years ended December 31:
 Year ended December 31,2007
    
    
    2008Total assets
    
    $
    17,671,647
    
    
    $
    75,142,761Total liabilities
    
    
    18,056,122
    
    
    
    71,209,109
 Year ended December 31,2006
    
    
    2007
    
    
    2008Net revenue
    
    
    1,286,614
    
    
    
    1,022,735
    
    
    
    3,712,343Net income (loss)
    
    
    (4,999
    )
    
    
    (1,021,290
    )
    
    
    227,474
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentationThe consolidated financial statements of the Group have been prepared in accordance with
accounting principles generally accepted in the United States of America (U.S. GAAP).Basis of consolidationThe consolidated financial statements include the financial statements of China Finance
Online, its subsidiaries and its variable interest entities. All inter-company transactions
and balances have been eliminated upon consolidation.Cash and cash equivalentsCash and cash equivalents consist of cash on hand and highly liquid investments which are
unrestricted as to withdrawal or use, and which have remaining maturities of three months or
less when purchased.Fair valueThe Group adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurements (SFAS 157) on January 1, 2008 for all financial assets and liabilities and
nonfinancial assets and liabilities that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). SFAS 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value
measurements.SFAS 157 defines fair value as the price that would be received from selling an asset or
paid to transfer a liability in an orderly transaction between market participants at the
measurement date. When determining the fair value measurements for assets and liabilities
required or permitted to be recorded at fair value, the Group considers the principal or
most advantageous market in which it would transact and it considers assumptions that market
participants would use when pricing the asset or liability.SFAS 157 establishes a fair value hierarchy that requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value. A
financial instruments categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. SFAS 157
establishes three levels of inputs that may be used to measure fair value:Level 1Level 1 applies to assets or liabilities for which there are quoted prices in active markets
for identical assets or liabilities.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedFair value  continuedLevel 2Level 2 applies to assets or liabilities for which there are inputs other than quoted prices
included within Level 1 that are observable for the asset or liability such as quoted prices
for similar assets or liabilities in active markets; quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which significant inputs are observable or can be
derived principally from, or corroborated by, observable market data.Level 3Level 3 applies to assets or liabilities for which there are unobservable inputs to the
valuation methodology that are significant to the measurement of the fair value of the
assets or liabilities.The Group has no financial assets and liabilities subject to SFAS 157 disclosure as of
December 31, 2008.Trust bank balances held on behalf of customersCFO Daily Growth receives fund from customers for purpose of buying or selling securities on
behalf of its customers and deposits the fund in its interest-bearing bank account. Such
bank balance represents an asset of the Group for the amounts due to customers for the trust
bank balance held on their behalf and payable to customers on demand. The Group also
recognizes a corresponding liability.Advance to employeesThe Group has made advances to certain individuals to enable them to participate in stock
trading in the Stock Exchange Campaign which was launched by the Group for marketing
purposes. The Stock Exchange Campaign was ended in year 2008. The balances represent
$1,672,575 and $160,837 as of December 31, 2007 and 2008 and are repayable to the Group on
demand.Use of estimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities
and revenue and expenses in the financial statements and accompanying notes. Significant
accounting estimates reflected in the Groups financial statements include colletibility of
account receivable, valuation allowance for deferred tax assets, fair value of stock option
and nonvested shares, useful lives and impairment of property and equipment, and impairment
of cost method investment and goodwill. Actual results could differ from those estimates.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedProperty and equipment, netProperty and equipment, net are carried at cost less accumulated depreciation. Depreciation
is calculated on a straight-line basis over the following estimated useful lives:
 Technology infrastructure
    
    5 yearsComputer equipment
    
    5 yearsFurniture, fixtures and equipment
    
    5 yearsMotor vehicle
    
    5 yearsLeasehold improvements
    
    Shorter of the lease term or 5  years
 Acquired intangible assets, netAcquired intangible assets consist of intangible assets other than goodwill acquired through
various acquisitions as described in Note 3 and are amortized on a straight-line basis over
their expected useful economic lives.If an intangible asset is determined to have an indefinite useful life, it should not be
amortized until its useful life is determined to be no longer indefinite. The Group reviews
intangible assets remaining useful lives in each reporting period. If such an asset is
later determined to have a finite useful life, that asset will then be amortized
prospectively over its estimated remaining useful life.The Group evaluates the recoverability of identifiable intangible assets with determinable
useful lives whenever events or changes in circumstances indicate that an intangible assets
carrying amount may not be recoverable. The Group measures the carrying amount of an
intangible asset against the estimated undiscounted future cash flows associated with it.
Impairment exists when the sum of the expected future net cash flows is less than the
carrying value of the asset being evaluated. Impairment loss is calculated as the amount by
which the carrying value of the asset exceeds its fair value. Fair value is estimated based
on various valuation techniques, including the discounted value of estimated future cash
flows. The evaluation of asset impairment requires the Group to make assumptions about
future cash flows over the life of the asset being evaluated. These assumptions require
significant judgment and actual results may differ from assumed and estimated amounts.
During the years ended December 31, 2006, 2007 and 2008, the Group did not record any
impairment losses associated with intangible assets.An intangible asset that is not subject to amortization is tested for impairment at least
annually if events or changes in circumstances indicate that the asset might be impaired.
Such impairment test consists of a comparison of the fair values of the assets with their
carrying amounts and an impairment loss is recognized if and when the carrying amounts
exceed the fair values.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedAcquired intangible assets, net  continuedThe estimates of fair values of intangible assets not subject to amortization are determined
using various discounted cash flow valuation methodologies. Significant assumptions are
inherent in this process, including estimates of discount rates. Discount rate assumptions
are based on an assessment of the risk inherent in the respective intangible assets. During
the years ended December 31, 2006, 2007 and 2008, the Group did not record any impairment
losses associated with intangible assets.Impairment of long-lived assetsThe Group reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may no longer be recoverable.
When these events occur, the Group measures impairment by comparing the carrying value of
the long-lived assets to the estimated undiscounted future cash flows expected to result
from the use of the assets and their eventual disposition. If the sum of the expected
undiscounted cash flow is less than the carrying amount of the assets, the Group would
recognize an impairment loss based on the fair value of the assets. There were no
impairment losses in the years ended December 31, 2006, 2007 and 2008.GoodwillThe excess of the purchase price over the fair value of net assets acquired is recorded on
the consolidated balance sheet as goodwill.The Group tests goodwill annually following a two-step process in accordance with SFAS No.
142, Goodwill and Other Intangible Assets. The first step compares the fair values of
each reporting unit to its carrying amount, including goodwill. If the fair value of each
reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and
the second step will not be required. If the carrying amount of a reporting unit exceeds
its fair value, the second step compares the implied fair value of goodwill to the carrying
value of a reporting units goodwill. The implied fair value of goodwill is determined in a
manner similar to accounting for a business combination with the allocation of the assessed
fair value determined in the first step to the assets and liabilities of the reporting unit.
The excess of the fair value of the reporting unit over the amounts assigned to the assets
and liabilities is the implied fair value of goodwill. An impairment loss is recognized for
any excess in the carrying value of goodwill over the implied fair value of goodwill.The Group performs goodwill impairment tests annually on December 31 by comparing the
carrying value to the fair value of each reporting unit. Based on the Groups assessment,
there was no impairment of goodwill for the years ended December 31, 2006, 2007 and 2008.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedRevenue recognitionThe Group generates revenue primarily from annual subscription fees from subscribers to
their financial data and information services including their downloadable proprietary
research tools. The Group recognizes revenues when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is
fixed or determinable and (4) collectibility is probable. Upon receipt of the upfront cash
payments from the subscriber, the Group will activate the
subscribers account and provide
the subscriber the access code. This will commence a certain subscription period according
to the customer demand and the full payment will be deferred and recognized ratably over the
subscription period. Since the Group does not have sufficient vendor specific objective
evidence to allocate revenue to the various elements of the arrangement, the Group
recognizes revenue ratably over the life of the arrangement.The Group provides short messaging services (SMS) which are delivered primarily through
intermediary companies licensed to provide SMS services on behalf of mobile phone service
providers. The Group evaluates the criteria outlined in EITF No. 99-19, Reporting Revenue
Gross as Principal Versus Net as an Agent, in determining whether it is appropriate to
record the gross amount of revenues and related costs or the net amount earned after
deducting service and network fees paid to the mobile phone service providers. The Group
records the gross amounts billed to its customers as the Group is the primary obligor in
these transactions based on the following criteria: it has latitude in establishing prices;
is involved in the determination of the service specifications; and has the right to select
suppliers. When recording the gross revenue, the Group measures its revenues based on the
total amount paid by its customers, for which the mobile phone service provider bills and
collects on the Groups behalf. Accordingly, the 15% service fee paid to the mobile phone
service provider is included in the cost of revenues.The Group derives its advertising fees from advertising sales on their website principally
for a fixed period of time, generally less than one year. Revenues from advertising
arrangements are recognized ratably over the period the advertising is displayed.The Group also derives commission from its brokerage services provided by the newly acquired
subsidiary, CFO Daily Growth, which buys or sells securities on its customers behalf. The
commission income is recognized on a trade date basis as securities transactions occur.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedBusiness taxes and value added taxesRevenue is recorded net of business taxes when incurred. The Group is subject to business
taxes of approximately 5% on taxable services provided to its customers. During the years
ended December 31, 2006, 2007, and 2008, business taxes totaled $208,559, $667,400, and
$903,330 respectively.The Groups PRC subsidiaries are subject to value added tax at a rate of 17% on
subscription-based revenue. Value added tax payable on subscription-based revenue is
computed net of value added tax paid on purchases. In respect of subscription-based
revenue, however, if the net amount of value added tax payable exceeds 3% of
subscription-based revenue, the excess portion of value added tax can be refunded
immediately. The Group therefore is subject to an effective net value added tax burden of
3% from subscription-based revenue and records value added tax on a net basis. Net amount
of value added tax is recorded either in the line item of other current liabilities or
prepaid expenses and other current assets on the face of consolidated balance sheet.Subscription-based revenue includes the benefit of the rebate of value added taxes on sale
of the downloadable software received from the Chinese tax authorities as part of the PRC
government policy of encouraging software development in the PRC. In 2006, 2007 and 2008,
the Group recognized $516,773, $2,233,528, and $4,834,336, respectively, in value added tax
refunds.Government subsidiesThe Group records government subsidies when granted by local government authority and are
not subject to future return or reimbursement. The government subsidies include R&D
subsidy, business tax refund, innovation fund and high-tech company subsidy. Government
subsidies granted totaled $nil, $135,834 and $436,946 for the years ended December 31, 2006,
2007 and 2008, respectively.Deferred revenuePayments received in advance of service are recorded as deferred revenue until earned and
when the relevant revenue recognition requirements have been met.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedCost method investmentIn December 2005, the Group purchased 9,800,000 Series B preferred shares in a private
company, Moloon International Inc., (Moloon) for $15,000,000, which represents a 25%
interest in Moloon on an if-converted basis. China Finance Onlines investment in these
preferred shares is not in-substance common stock, and accordingly, the investment has been
recorded as a cost method investment. As Moloon does not have readily determinable fair
value, the Group carries the investment at cost and only adjusted for other-than-temporary
declines in fair value and distributions of earnings. The management regularly evaluates
the impairment of the cost method investment based on performance and the financial position
of the investee as well as other evidence of market value. Such evaluation includes, but is
not limited to, reviewing the investees cash position, recent financings, projected and
historical financial performance, cash flow forecasts and financing needs. An impairment
loss is recognized in earnings equal to the difference between the investments cost and its
fair value at the balance sheet date of the reporting period for which the assessment is
made. The fair value of the investment would then become the new cost basis of the
investment. The Group recorded an other-than-temporary impairment charge totaling
$1,322,000 during the year ended December 31, 2006, and $11,127,000 during the year ended
December 31, 2007. No impairment charges were recorded during the year ended December 31,
2008.Foreign currency translationThe functional currency of China Finance Onlines significant subsidiaries and variable
interest entities is Renminbi (RMB) except CFO Daily Growth, CFO DG Futures and CFO DG
Wealth Management, of which the functional currency is Hong Kong dollar. Monetary assets
and liabilities denominated in other currencies are translated into the applicable
functional currencies at rates of exchange in effect at the balance sheet date. Nonmonetary
assets and liabilities are remeasured into the applicable functional currencies at
historical exchange rates and transactions denominated in other currencies are translated
using the average rate for the year. Exchange gains and losses are recorded in the
consolidated statement of operations.China Finance Online uses the U.S. dollar as its functional and reporting currency.
Accordingly assets and liabilities are translated using the exchange rates in effect on the
balance sheet date. Transactions in currencies other than the U.S. dollar are translated
using the average exchange rate prevailing in the period when transactions occurred.
Translation adjustments are reported as cumulative transition adjustments and are shown as a
separate component of other comprehensive income (loss) in the accompanying consolidated
statements of shareholders equity and comprehensive income (loss).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedForeign currency riskThe RMB is not a freely convertible currency. The State Administration for Foreign
Exchange, under the authority of the Peoples Bank of China, controls the conversion of
Renminbi into foreign currencies. The value of the RMB is subject to changes in central
government policies and to international economic and political developments affecting
supply and demand in the China Foreign Exchange Trading System market. Cash and cash
equivalents of the Group included aggregate amounts of $51,150,706 and $79,921,228 at
December 31, 2007 and 2008 which were denominated in RMB.Cost of raw dataCost of raw data is expensed as incurred and is recorded in cost of revenues.Product development expensesCosts of product development, including database technology, are expensed as incurred until
technological feasibility has been established, at which time any additional costs would be
capitalized. To date, the Group has essentially completed its development concurrently with
the establishment of technological feasibility, and, accordingly, no costs have been
capitalized.Advertising costsThe Group expenses advertising costs as incurred. Total advertising expenses were $921,365,
$158,631, and $1,102,779 for the years ended December 31, 2006, 2007 and 2008, respectively,
and have been included as part of sales and marketing expenses.Income taxesDeferred income taxes are recognized for temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements, net operating
loss carry forwards and credits by applying enacted statutory tax rates applicable to future
years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Current income taxes are provided for in accordance with the laws of
the relevant tax authorities.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedIncome taxes  continuedIn June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48
(FIN 48), Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected to
be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15,
2006, with early adoption permitted. The Group adopted FIN 48 on January 1, 2007. The
adoption of FIN 48 did not result in a cumulative adjustment on January 1, 2007 and had no
significant impact on the Groups accounting for income taxes for the year ended December
31, 2007 and 2008. The Group did not incur any interest and penalties related to potential
underpaid income tax expenses. The management does not expect to have a significant
increase or decrease on the unrecognized tax benefits within 12 months from December 31,
2008.Comprehensive incomeComprehensive income includes net income (loss) and foreign currency translation
adjustments. Comprehensive income is reported as a component of the consolidated statements
of shareholders equity and comprehensive income.Fair value of financial instrumentsFinancial instruments include cash and cash equivalents, accounts receivable, and accounts
payable. The carrying values of cash and cash equivalents, accounts receivable and accounts
payable approximate their fair value due to their short-term maturities. The Group does not
use derivative instruments to manage risks.Concentrations of credit riskFinancial instruments that potentially expose the Group to concentrations of credit risk
consist principally of cash and cash equivalents and accounts receivable. The Group places
its cash and cash equivalents with financial institutions with high-credit ratings and
quality.The Group conducts ongoing credit evaluations of its customers and generally does not
require collateral or other security from its customers. The Group manages its credit risk
by collecting up-front fee from its customers and billing at regular intervals during the
contract period. The Group assesses the adequacy of allowance for doubtful accounts
primarily based upon the age of the receivables and factors surrounding the credit risk of
specific customers.There were no customers with 10% or more of the Groups revenues and accounts receivable
during 2006, 2007, or 2008.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedStock-based compensationEffective January 1, 2006, the Group adopted the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-based
Payment (SFAS 123(R)) which requires that share-based payment transactions with employees
be measured based on the grant-date fair value of the equity instrument issued and
recognized as compensation expense over the requisite service period, The Group recognizes
stock-based compensation costs over the requisite service period during which an employee is
required to provide service in exchange for the award, which generally is the vesting
period.The Group accounted for share-based compensation awards issued to non-employees in
accordance with the provisions of SFAS 123(R) and EITF Issue No. 96-18, Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services (EITF 96-18). Under SFAS 123(R) and EITF 96-18, the
Group uses the Black-Scholes Option Pricing Model to measure the value of options granted to
non-employees at the earlier of the commitment date or the date at which the non-employees
performance is complete. Prior to the measurement date, non-employee share-based
compensation is remeasured at its fair value at each financial reporting date with any
changes in the fair value recorded in the consolidated statements of operations.Income (loss) per shareBasic income (loss) per share is computed by dividing net income (loss) by the weighted
average number of ordinary shares outstanding during the period. Diluted income (loss) per
ordinary share reflects the potential dilution that could occur if securities or other
contracts to issue ordinary shares were exercised or converted into ordinary shares, the
dilutive effect of the stock options and nonvested shares is computed using treasury stock
method.Recent accounting standardsIn September 2006, FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157).
Effective January 1, 2008, the Group adopted the measurement and disclosure other than those
requirements related to nonfinancial assets and liabilities in accordance with guidance from
FASB Staff Position 157-2, Effective Date of FASB Statement No. 157, which delayed the
effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except
for items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until the beginning of fiscal year 2009. The Group
does not believe that the adoption of SFAS 157 for nonfinancial assets and liabilities would
have a significant effect on its consolidated financial position or results of operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedRecent accounting standards  continuedIn December 2007, the FASB issued SFAS No. 141(Revised 2007), Business Combination (SFAS
141(R)), to improve consistency in the accounting and financial reporting of business
combinations. The standard requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the transaction;
establishes the acquisition-date fair value as the measurement objective for all assets
acquired and liabilities assumed; and requires the acquirer to disclose to investors and
other users all of the information they need to evaluate and understand the nature and
financial effect of the business combination. SFAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not apply it before
that date. The Group does not believe that the adoption of SFAS 141(R) would have a
significant effect on its consolidated financial position or results of operations.On April 1, 2009, the FASB issued a FASB Staff Position (FSP) No. 141(R)-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies. This FSP amends and clarifies SFAS 141(R) to address application issues on
initial recognition and measurement, subsequent measurement and accounting, and disclosure
of assets and liabilities arising from contingencies in a business combination. FSP FAS
141(R)-1 shall be effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. The Group does not believe that
the adoption of FSP FAS 141(R)-1 would have a significant effect on its consolidated
financial position or results of operations.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements (SFAS 160) to improve the relevance, comparability, and transparency
of financial information provided to investors by requiring all entities to report
noncontrolling (minority) interests in subsidiaries in the same way as required in the
consolidated financial statements. Moreover, SFAS 160 eliminates the diversity that
currently exists in accounting for transactions between an entity and noncontrolling
interests by requiring they be treated as equity transaction. SFAS 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or after December
15, 2008. Earlier adoption is prohibited. The Group does not believe that the adoption of
SFAS 160 would have a significant effect on its consolidated financial position or results
of operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedRecent accounting standards  continuedIn April 2008, the FASB issued FASB Staff Position FAS142-3, Determination of the Useful
Life of Intangible Assets. This FSP amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible
Assets. This FSP is effective for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early adoption is prohibited. The guidance for
determining the useful life of a recognized intangible asset in this FSP shall be applied
prospectively to intangible assets acquired after the effective date. The Group does not
believe that the adoption of FASB Staff Position FAS142-3 would have a significant effect on
its consolidated financial position or results of operations.At the November 24, 2008 meeting, the FASB ratified the consensus reached by the Task Force
in Issue No. 08-6, Equity Method Investment Accounting Considerations (EITF 08-6).
Because of the significant changes to the guidance on subsidiary acquisitions and subsidiary
equity transactions and the increased use of fair value measurements as a result of SFAS No.
141R and SFAS No. 160, questions have arisen regarding the application of that accounting
guidance to equity method investments. EITF 08-6 provides guidance for entities that
acquire or hold investments accounted for under the equity method. EITF 08-6 is effective
for transactions occurring in fiscal years and interim periods beginning on or after
December 15, 2008. Early adoption is not permitted. The Group does not believe that the
adoption of EITF 08-6 would have a significant effect on its consolidated financial position
or results of operations.At the June 25, 2008 meeting, the FASB ratified the consensus reached by the Task Force in
Issue EITF No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to
an Entitys Own Stock(EITF 07-5). EITF 07-5 provides guidance for determining whether an
equity-linked financial instrument (or embedded feature) is indexed to an entitys own
stock. This Issues fixed-for-fixed, plus fair value inputs model is largely consistent
with current interpretations of the phrase indexed to an entitys own stock. However, in
certain circumstances, EITF 07-5 may result in changes to those accounting conclusions and
may have impact on issuers of equity-linked financial instruments (e.g., options or forward
contracts) or instruments containing embedded features (e.g., embedded conversion options in
a convertible instrument) that have (1) exercise or settlement contingency provisions, (2) a
strike price that is subject to adjustment, or (3) a strike price that is denominated in a
currency other than the entitys functional currency. It is applied to outstanding
instruments as of January 1, 2009. The Group does not believe that the adoption of EITF
07-5 would have a significant effect on its consolidated financial position or results of
operations.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedRecent accounting standards  continuedIn November 2008 the FASB ratified EITF Issue No. 08-7, Accounting for Defensive Intangible
Assets, (EITF 08-7). EITF 08-7 applies to defensive intangible assets, which are
acquired intangible assets that the acquirer does not intend to actively use but intends to
hold to prevent its competitors from obtaining access to them. As these assets are
separately identifiable, EITF 08-7 requires an acquiring entity to account for defensive
intangible assets as a separate unit of accounting which should be amortized to expense over
the period the asset diminished in value. Defensive intangible assets must be recognized at
fair value in accordance with SFAS 141(R) and SFAS 157. EITF 08-7 is effective for
financial statements issued for fiscal years beginning after December 15, 2008. The Group
does not believe that the adoption of EITF 08-7 would have a significant effect on its
consolidated financial position or results of operations.In November, 2008, the Task Force affirmed as a consensus that EITF Issue No.08-8,
Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount That Is
Based on the Stock of an Entitys Consolidated Subsidiary (EITF 08-8) shall be effective
for fiscal years beginning on or after December 15, 2008, and interim periods within those
fiscal years. Under EITF 08-8, freestanding financial instruments(or embedded features)
that are indexed to, in whole or in part, the stock of a consolidated subsidiary are
considered indexed to the entitys own stock in the consolidated financial statements if (1)
the requirements of Issue 07-5 are met and (2) the subsidiary is a substantive entity. The
Group does not believe that the adoption of EITF 08-8 would have a significant effect on its
consolidated financial position or results of operations.On April 9, 2009, the FASB issued FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB
Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require
disclosures about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. This FSP also amends
APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in
summarized financial information at interim reporting periods. This FSP will be effective
on April 1, 2009. This FSP does not require disclosures for earlier periods presented for
comparative purposes at initial adoption. In periods after initial adoption, this FSP
requires comparative disclosures only for periods ending after initial adoption. The Group
does not believe that the adoption of this FSP would have a significant effect on its
consolidated financial position or results of operations.On April 9, 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more operational
and to improve the presentation and disclosure of other-than-temporary impairments on debt
and equity securities in the financial statements. This FSP does not amend existing
recognition and measurement guidance related to other-than-temporary impairments of equity
securities. The FSP will be effective on April 1, 2009. This FSP does not require
disclosures for earlier periods presented for comparative purposes at initial adoption. In
periods after initial adoption, this FSP requires comparative disclosures only for periods
ending after initial adoption. The Group does not believe that the adoption of this FSP
would have a significant effect on its consolidated financial position or results of
operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continuedRecent accounting standards  continuedOn April 9, 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. This FSP provides additional guidance for
estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements,
when the volume and level of activity for the asset or liability have significantly
decreased. This FSP also includes guidance on identifying circumstances that indicate a
transaction is not orderly. This FSP emphasizes that even if there has been a significant
decrease in the volume and level of activity for the asset or liability and regardless of
the valuation technique(s) used, the objective of a fair value measurement remains the same.
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction (that is, not a forced liquidation or distressed sale)
between market participants at the measurement date under current market conditions. This
FSP will be effective on April 1, 2009 and will be applied prospectively. This FSP does not
require disclosures for earlier periods presented for comparative purposes at initial
adoption. In periods after initial adoption, this FSP requires comparative disclosures only
for periods ending after initial adoption. The Group does not believe that the adoption of
this FSP would have a significant effect on its consolidated financial position or results
of operations.3.
    
    ACQUISITIONSTo expand its market share during 2006, 2007 and 2008, China Finance Online made a number of
acquisitions of businesses. Each acquisition has been recorded using the purchase method of
accounting, and accordingly the acquired assets and liabilities were recorded at their fair
values on the dates of acquisitions and the results of their operations have been included
in the Groups results of operations since the dates of their acquisitions. The fair values
of the assets and liabilities acquired were estimated using a combination of valuation
methods, such as income approach, market approach and cost approach method,
considering, among other factors, forecasted financial performance of the acquired business,
market performance, and market potential of the acquired business in China.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 3.
    
    ACQUISITIONS  continuedAcquisition of CFO NewrandOn October 17, 2008, CFO software, one subsidiary of the Company acquired 100% of the equity
interest of CFO Newrand, which is a licensed security consulting firm, through two PRC
citizens designated by the Company. CFO Software signed a series of contractual agreements
with CFO Newrand and its shareholders that provide the Group with the ability to
substantially control CFO Newrand (see Note1). For the acquisition, the total cash
consideration was $3,826,296, of which, $3,709,037 was paid in 2008 with the remaining
consideration of $117,259 to be paid within the next twelve months.
 AmortizationperiodPurchase price allocation:Cash and cash equivalents
    
    $
    1,521,109Acquired intangible assets:Security consulting license
    
    
    1,183,926
    
    
    15 yearsTrade mark
    
    
    440,496
    
    
    15 yearsTotal assets acquired
    
    
    3,145,531Deferred tax liabilities
    
    
    (406,106
    )Total net asset
    
    
    2,739,425Goodwill
    
    
    1,086,871Total
    
    
    3,826,296
 Acquisitions of CFO Zhongcheng & CFO HuifuOn October 29, 2008 and October 22, 2008, CFO Software acquired 100% of the equity interest
in CFO Zhongcheng and CFO Huifu through two PRC citizens, respectively. CFO Software signed
a series of contractual agreements with CFO Zhongcheng and CFO Huifu, respectively, and
their shareholders that provide the Group with the ability to substantially control CFO
Zhongcheng and CFO Huifu (see Note1). For the fore mentioned acquisitions, the total cash
considerations were $255,974 and $202,359 was recorded on the consolidated balance sheet as
goodwill.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 3.
    
    ACQUISITIONS  continuedAcquisition of CFO Daily GrowthOn November 23, 2007, China Finance Online acquired 85% of the equity interest in CFO Daily
Growth, which is a licensed securities brokerage firm with a history of 36 years and
primarily engages in the business of providing brokerage services in Hong Kong. With the
acquisition of CFO Daily Growth, the Group is able to provide a diversified portfolio of
brokerage and other related services to its customers. For the acquisition, the total cash
consideration was $3,624,853, including $706,371 in transaction costs.
 AmortizationperiodPurchase Price allocation: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
    
    
    26,100Acquired intangible asset:Stock Exchange Trading Right
    
    
    54,642
    
    
    IndefiniteTotal assets acquired
    
    
    6,157,756Account 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
    )Total net asset
    
    
    2,811,460Goodwill
    
    
    813,393Total
    
    
    3,624,853
 In March 2008, the Group injected further capital of $11,565,000 (equivalent to
HK$90,000,000) in CFO Daily Growth; consequently, the Groups equity interest in CFO Daily
Growth increased from 85% to 98.5%. On May 15, 2008, the Company acquired the remainder
1.5% equity interest in CFO Daily Growth for a cash consideration of $678,073 including
$61,405 in transaction costs and recorded $456,501 on the consolidated balance sheet as
goodwill. CFO Daily Growth became wholly owned by the Company.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 3.
    
    ACQUISITIONS  continuedAcquisition of CFO GeniusOn September 21, 2006, China Finance Online entered into an agreement to acquire all the
equity interest in CFO Genius for a total cash consideration of $1,040,081, including
$40,081 in transaction costs. CFO Genius engages in the business of constructing and
maintaining financial information databases and providing networked information solutions.
It was the first company in China to provide such services for domestic securities and
investment firms at the time of its establishment in 1994. The acquisition is expected to
strengthen the Groups position in the industry and provide future opportunities to develop
database products.
 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
    
    
    (67,520
    )Total net liabilities
    
    
    (28,277
    )Goodwill
    
    
    1,068,358Total
    
    $
    1,040,081
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 3.
    
    ACQUISITIONS  continuedAcquisition of CFO Meining and CFO StockstarOn October 1, 2006, China Finance Online acquired two companies to expand its business in
China. The Group acquired all the equity interests of CFO Stockstar and CFO Meining.
Stockstar is a leading finance and securities website in China. For the acquisition, total
cash consideration was $8,135,269 including transaction costs of $117,953. The following
table summarizes the estimated fair values of the assets acquired and liabilities assumed at
the date of acquisition.
 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
    
    
    (136,710
    )Total net assets
    
    
    1,102,310Goodwill
    
    
    7,032,959Total
    
    $
    8,135,269
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 3.
    
    ACQUISITIONS  continuedAcquisition of CFO Meining and CFO Stockstar  continuedThe following summarized unaudited pro forma results of operations for the years ended
December 31,2006, 2007 and 2008 assuming that all significant acquisitions during the year
ended December 31,2006, 2007 and 2008 occurred as of January 1, 2006, 2007 and 2008
respectively. These pro forma results have been prepared for comparative purposes only and
do not purport to be indicative of the results of operations which actually would have
resulted had the significant acquisitions occurred as of January 1, 2006, 2007 and 2008, nor
is it indicative of future operating results.
 For the years ended December 31,2006
    
    
    2007
    
    
    2008(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Revenues
    
    $
    10,671,796
    
    
    $
    26,930,986
    
    
    $
    56,371,385Net income (loss)
    
    $
    (2,891,544
    )
    
    $
    235,997
    
    
    $
    18,858,118Income (loss) per share  basic
    
    $
    (0.03
    )
    
    $
    0.00
    
    
    $
    0.19Income (loss) per share  diluted
    
    $
    (0.03
    )
    
    $
    0.00
    
    
    $
    0.17
 4.
    
    PREPAID EXPENSES AND OTHER CURRENT ASSETSPrepaid expenses and other current assets consist of the following:
 December 31,2007
    
    
    2008Prepayment of advertising fees
    
    $
    
    
    
    $
    3,833,486Advertising deposit (note 1)
    
    
    
    
    
    
    175,889Prepayment to sales agents
    
    
    
    
    
    
    950,752Advances to suppliers
    
    
    809,221
    
    
    
    817,432VAT refund receivable
    
    
    844,800
    
    
    
    791,784Income tax prepayment and
business tax refund receivable
    
    
    
    
    
    
    228,564Rebate receivable for raw data fee (note 2)
    
    
    
    
    
    
    477,596Prepayment for raw data fee (note 3)
    
    
    
    
    
    
    305,328Prepaid capital to be injected in VIE (note 4)
    
    
    685,439
    
    
    
    Interest receivable
    
    
    216,947
    
    
    
    224,656Other current assets
    
    
    390,647
    
    
    
    775,928$
    2,947,054
    
    
    $
    8,581,415
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 4.
    
    PREPAID EXPENSES AND OTHER CURRENT ASSETS  continuedNotes:
 (1)
    
    The advertising deposit represents amounts of deposit paid to advertising
agent, which is expected to be refunded within a year.(2)
    
    According to various license agreements with Shanghai Stock Exchange
Information Network Co., Ltd., the Company was entitled to receive certain rebate as
incentive, which was calculated based on the volume of raw data used by the Company in
the provision of subscription services.(3)
    
    On December 12, 2008, Shanghai Stock Exchange Information Network Co., Ltd,
terminated one of the license agreements and would no longer provide certain raw data
to third party vendors, including the Company, effective January 1, 2009. As a result,
the Company would not be able to continue to provide the subscription services based
such raw data, which were subscribed by the customers before the termination of this
license agreement. Therefore, the prepaid royalty fee according to this agreement is
expected to be refunded by Shanghai Stock Exchange Information Network Co., Ltd..(4)
    
    As of December 31, 2007, $685,439 was held by the CEO, who is the designated
owner of CFO Fuhua, for the additional capital injected to CFO Fuhua in year 2008.
 5.
    
    COST METHOD INVESTMENTIn December 2005, the Group purchased 9,800,000 Series B preferred shares in Moloon for
$15,000,000, which represents a 25% interest in Moloon on an if-converted basis. China
Finance Onlines investment in these preferred shares is not in-substance common stock, and
accordingly, the investment has been recorded as a cost method investment.In April 2006, the Group sold part of its investment in Moloon to a third party for a cash
consideration of $1,187,500, resulting in a gain of $116,071 which has been recorded as a
non operating income in the accompanying consolidated statements of operations. As a result
of this disposal, the Groups investment in Moloons preferred shares decreases to 9,100,000
shares.Moloon is a Chinese wireless technology and service provider. During the second half of
2006, China Mobile Communication Corporation announced policy changes which, among others,
required providers of mobile value added service, or MVAS to extend free trial periods for
customers prior to subscriptions and to send reminders to customers confirming new and
existing subscriptions. These policy changes had a substantial negative impact on Moloons
MVAS business. Consequently, following an independent valuation prepared by American
Appraisal China Limited, the Group determined that its investment in Moloon was impaired and
recorded an impairment loss of $1,322,000 in the accompanying consolidated statements of
operations for 2006.
 F-32




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 5.
    
    COST METHOD INVESTMENT  continuedThereafter, Moloon adopted new strategies to transform itself into a provider of mobile
online gaming services in China. However, despite the new strategies Moloons financial
conditions have deteriorated and, following an independent valuation prepared by American
Appraisal China Limited, the Group determined that its investment in Moloon was further
impaired and recorded an additional impairment loss of $11,127,000 in 2007, reducing the
carrying balance of such investment to $1,479,571.The Company fully relied on the valuation prepared by American Appraisal China Limited of
the Groups cost method investment in Moloon, there was no impairment presented for the year
ended December 31, 2008.6.
    
    PROPERTY AND EQUIPMENT, NETProperty and equipment, net consisted of:
 December 31,2007
    
    
    2008Technology infrastructure
    
    $
    3,360,909
    
    
    $
    5,954,777Computer equipment
    
    
    1,036,325
    
    
    
    1,574,533Furniture, fixtures and equipment
    
    
    894,783
    
    
    
    1,955,792Motor vehicle
    
    
    129,636
    
    
    
    432,940Leasehold improvements
    
    
    1,268,731
    
    
    
    1,807,2116,690,384
    
    
    
    11,725,253Less: accumulated depreciation
    
    
    (1,235,526
    )
    
    
    (3,136,562
    )$
    5,454,858
    
    
    $
    8,588,691
 Depreciation expense for the years ended December 31, 2006, 2007, and 2008 were $230,552,
$680,702, and $1,794,368, respectively.
 F-33




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 7.
    
    ACQUIRED INTANGIBLE ASSETS, NETAcquired intangible assets, net arose from the acquisitions of CFO Genius, CFO Meining,
CFO-Stockstar, CFO Newrand, CFO Daily Growth and CFO Zhongcheng and from the establishment
of CFO DG Futures during 2006, 2007 and 2008 and consisted of the following:
 December 31,2007
    
    
    2008Intangible assets not subject to amortization:Trademarks
    
    
    789,625
    
    
    
    844,265Stock exchange trading right
    
    
    54,498
    
    
    
    64,517Futures exchange trading right
    
    
    
    
    
    
    64,517Intangible assets subject to amortization:Completed technology
    
    
    796,480
    
    
    
    851,594Customer relationship
    
    
    642,941
    
    
    
    687,431Value-added service license
    
    
    25,361
    
    
    
    27,116Agreement with mobile operators
    
    
    11,378
    
    
    
    12,166Security consulting license and related trademarks
    
    
    
    
    
    
    1,626,969Intellectual property
    
    
    
    
    
    
    73,2872,320,283
    
    
    
    4,251,862Less: Accumulated amortization
    
    
    (382,106
    )
    
    
    (778,746
    )$
    1,938,177
    
    
    $
    3,473,116
 Amortization expense for the years ended December 31, 2006, 2007 and 2008 was $71,389,
$293,251 and $344,777, respectively. Future amortization expenses of acquired intangible
assets with determinable lives are $442,025, $436,767, $311,510, $115,793 and $1,193,722 for
2009, 2010, 2011, 2012 and 2013 and thereafter, respectively.8.
    
    GOODWILLChanges in goodwill for the years ended December 31, 2006, 2007 and 2008 were as follows:
 Southern
    
    Eastern
    
    NorthernChina
    
    China
    
    China
    
    Hong Kong
    
    TotalBalance as of January 1, 2007
    
    
    1,068,358
    
    
    
    7,083,493
    
    
    
    
    
    
    
    
    
    
    
    8,151,851Acquisition (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    813,393
    
    
    
    813,393Exchange difference
    
    
    92,979
    
    
    
    595,634
    
    
    
    
    
    
    
    (2,138
    )
    
    
    686,475Balance as of December 31, 2007
    
    
    1,161,337
    
    
    
    7,679,127
    
    
    
    
    
    
    
    811,255
    
    
    
    9,651,719Acquisition (Note 3)
    
    
    1,086,871
    
    
    
    
    
    
    
    202,359
    
    
    
    456,501
    
    
    
    1,745,731Exchange difference
    
    
    82,066
    
    
    
    531,377
    
    
    
    400
    
    
    
    7,219
    
    
    
    621,062Balance as of December 31, 2008
    
    
    2,330,274
    
    
    
    8,210,504
    
    
    
    202,759
    
    
    
    1,274,975
    
    
    
    12,018,512
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 8.
    
    GOODWILL  continuedSFAS No. 142 requires that the goodwill impairment assessment be performed at the reporting
unit level. During the year ended December 31, 2008, the Group tested its goodwill at its
four reporting units level.Southern China  CFO Jujin was established after the acquisition of CFO Genius, and CFO
Newrand was acquired in year 2008. For goodwill allocation purposes, CFO Jujin, CFO Genius
and CFO Newrand have been identified as a reporting unit (Southern China). CFO Jujin and
CFO Genius provide similar financial data subscription service to the subscribers located in
Southern China and the Group regards this area as regional subscription service provision
center for management efficiency, and CFO Newrand provides security consulting service for
CFO Jujin and CFO Genius. The goodwill arising from related acquisition is fully allocated
to this reporting unit.Eastern China  CFO Zhengning, CFO Zhengtong, CFO Zhengyong, CFO Shangtong and CFO Chongzhi
were established after the acquisition of CFO Meining and CFO Stockstar. For goodwill
allocation purposes, they have been identified as a single reporting unit (Eastern China),
which provides similar financial data subscription service to the subscribers located in
Eastern China and the Group regards this area as regional subscription service provision
center for management efficiency. The goodwill arising from related acquisition is fully
allocated to this reporting unit.Northern China  All of the subsidiaries and VIEs located in Beijing are identified as a
single reporting unit (North China), which provides similar financial data subscription
service to the subscribers located in Northern China. The Group regards this area as
regional subscription service provision center for management efficiency. The goodwill
arising from related acquisition is fully allocated to this reporting unit.Hong Kong  CFO DG Futures and CFO DG Wealth Management were established after the
acquisition of CFO Daily Growth. CFO Daily Growth, CFO DG Futures and CFO DG Wealth
Management have been identified as a reporting unit (Hong Kong) as they provide similar
brokerage services. The goodwill arising from related acquisition is fully allocated to
this reporting unit.
 F-35




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 8.
    
    GOODWILL  continuedDuring its annual goodwill impairment test, the fair values of the reporting units were
estimated primarily using the income approach valuation methodology that includes the
discounted cash flow method, taking into consideration the market approach and certain
market multiples as a validation of the values derived using the discounted cash flow
methodology. The discounted cash flows for each reporting unit were based on discrete five
year financial forecasts developed by management for planning purposes. Cash flows beyond
the five year and discrete forecast were estimated using a terminal value calculation, which
incorporated historical and forecasted financial trends for each reporting unit and
considered long-term earnings growth rates for publicly traded peer companies. For the four
reporting units, Northern China and CFO Newrand were newly acquired in the end of 2008 and
there were no goodwill impairment indicators at the end of December 2008. The Company
evaluated the goodwill impairment at its annual goodwill impairment test on Southern China,
Eastern China and Hong Kong in December 2008. Specifically, the income approach valuations
included estimated reporting units cash flow discounted rates of approximately 21%, 22% and
25%, and terminal value growth rate at 3%, 3% and 3% for Southern China, Eastern China and
Hong Kong respectively. Publicly available information regarding the market capitalization
of the Group was also considered in assessing the reasonableness of the fair values of our
reporting units. As results of the goodwill impairment test, the Group determined that
there was no goodwill impairment as of December 31, 2008.9.
    
    ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESAccrued expenses and other current liabilities consist of:
 December 31,2007
    
    
    2008Accrued bonus
    
    $
    1,956,670
    
    
    $
    1,079,265Accrued professional service fees
    
    
    1,188,163
    
    
    
    295,152Withholding individual income tax-option exercise
    
    
    1,139,110
    
    
    
    171,158Value added taxes payable
    
    
    936,625
    
    
    
    908,699Other taxes payable
    
    
    440,149
    
    
    
    313,201Accrued raw data cost
    
    
    425,076
    
    
    
    173,841Accrued rental
    
    
    130,820
    
    
    
    93,600Accrued welfare benefits
    
    
    81,406
    
    
    
    143,834Sales return to customers (note 1)
    
    
    
    
    
    
    906,182Loan payable
    
    
    137,088
    
    
    
    146,574Acquisition consideration payable
    
    
    
    
    
    
    117,259Others
    
    
    515,147
    
    
    
    547,094$
    6,950,254
    
    
    $
    4,895,859
 F-36




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 9.
    
    ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES  continuedNotes:
 (1)
    
    Sales return to customers represents the amounts of sales return resulting from
termination of license agreement with Shanghai Stock Exchange Information Network Co.,
Ltd. for certain information provision. (see Note 4(3)).
 10.
    
    STOCK OPTIONS AND NONVESTED SHARESAs of December 31, 2008, the Company has two share-based compensation plans, which are
described below. The compensation cost that has been charged against income for those plans
was $1,183,662, $2,946,340, and $8,040,150 for 2006, 2007, and 2008, respectively.2004 Stock incentive planIn January 2004, the Company adopted the 2004 stock incentive plan (the 2004 Plan) which
allows the Company to offer a variety of incentive awards to employees, directors, officers
and other eligible persons in the Group. Options to purchase 5,688,488 ordinary shares are
authorized under the Plan. In September 2004 and December 2006, the Company increased the
total number of ordinary shares available for issuance under the 2004 Plan by an additional
5,000,000 shares, respectively, resulting in a total of 15,688,488 options to purchase
ordinary shares under the Plan. Options are generally granted at a price equal to the fair
market value of the Companys shares at the date of grant. As of December 31, 2008, options
to purchase 11,439,978 shares of ordinary shares are outstanding. All of the options
granted under the Plan to our directors and managers have vesting period of one to four
years, while options granted under the Plan to our other employees vest over a period of
three to five years. The options we granted to consultants and advisers vested immediately
upon grant or from two to three years after grant. A specified portion of the shares
subject to each option vests at the end of the first year and the balance vests each quarter
thereafter. The amortization of options granted is based on the graded vesting schedule.Options to employeesIn February 2005, the Company granted 4,053,000 stock options to directors, officers and
employees at an exercise price that equaled the trading price of the stock upon the stock
option grant. These options vest over 3 years. In November 2005, the Company granted
400,000 stock options to the Companys CEO and 200,000 stock options to the Companys Vice
President. The Company accounted for these options under APB 25, Accounting for Stock
Issued to Employees. These options vest over 2 years.In July 2006, the Company granted an additional 400,000 stock options to the Companys CEO
and 300,000 stock options to the Chief Financial Officer. The exercise prices equaled the
trading price of the stock at the grant date of the option. These options vest over 2
years.
 F-37




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 10.
    
    STOCK OPTIONS AND NONVESTED SHARES  continued2004 Stock incentive plan continuedOptions to employees  continuedDuring 2007, the Company granted totaling 3,848,000 stock options to directors, officers and
employees at an exercise price that equaled the trading price of the stock upon the stock
option grant. These options vest over 3 years except the 400,000 shares granted to the four
directors in January 2007 which vest over 2 years.In 2008, the Company granted totaling 2,820,840 stock options to directors, officers and
employees at an exercise price that equaled the trading price of the stock upon the stock
option grant. These options vest over 3 years. The fair value of employee options is
estimated on the basis of the Black-Scholes Option Pricing model with the following
assumptions:
 Years ended December 31,2007
    
    
    2008Weighted average risk free rate of return
    
    
    4.71
    %
    
    
    2.14
    %Weighted average expected option life
    
    5.96 years
    
    5.98 yearsExpected volatility rate
    
    
    59.92
    %
    
    
    61.87
    %Dividend yield
    
    
    
    
    
    
    
 (1)
    
    Expected volatilityThe volatility of the underlying ordinary shares during the life of the options was
estimated based on the historical stock price volatility of the Company and listed
comparable companies over a period comparable to the expected term of the options.(2)
    
    Risk-free interest rateRisk-free interest rate was estimated based on the yield to maturity of treasury
bonds of the United States with a maturity period close to the expected term of the
options.(3)
    
    Expected option lifeThe Group used the simplified method defined in Staff Accounting Bulletin No. 107 to
estimate the expected life.(4)
    
    Dividend yieldThe dividend yield was estimated by the Company based on its expected dividend policy
over the expected term of the options.
 F-38




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 10.
    
    STOCK OPTIONS AND NONVESTED SHARES  continued2004 Stock incentive plan continuedOptions to employees  continuedIn October and December 2008, ten employees of the Company waived their rights to purchase
in total of 970,000 ordinary shares of the Company pursuant to the
2004 Plan, and the Company accepted such waivers. On December
1, 2008, the Company granted new options which will vest in 3 years pursuant to the 2004
Plan. The foregoing is accounted for as a modification of the terms
of cancelled award. The incremental compensation cost of $76,200 arising from the grant of new options
was measured as the excess of the fair value of the new options at the grant date over the
fair value of the options waived by the ten employees at the date of waiver. The total
compensation cost is the remaining unrecognized share based compensation cost of $1,046,161
plus the incremental cost resulting from the waiver and the new grant, which is amortized
over the required service period under the newly granted option awards.Options to non-employeesIn 2004, the Company granted stock options to purchase up to 6,829,500 ordinary shares
outside of the 2004 Plan, which vested immediately and 90,000 options to purchase ordinary shares under the 2004 Plan to consultants and strategic advisors, which vested over 2 years.
The Company also granted 350,000 options under the 2004 Plan to consultants and strategy
advisors in 2005. The fair value of non-employee options is estimated using the
Black-Scholes Option Pricing model as such method provided a more accurate estimate of the
fair value of services provided by the consultants and strategic advisers. The fair value
of the stock options is remeasured as of the end of each reporting period until the services
of these non-employees are complete under the service contracts.All of the options which we granted to non-employees have been vested as of December 31,
2008.
 F-39




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 10.
    
    STOCK OPTIONS AND NONVESTED SHARES  continued2004 Stock incentive plan continuedSummary of stock options to employees and non-employeesA summary of the stock option activity is as follows:
 2006
    
    
    2007
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    average
    
    
    Number
    
    
    average
    
    
    Number
    
    
    averageof options
    
    
    exercise price
    
    
    of options
    
    
    exercise price
    
    
    of options
    
    
    exercise priceOutstanding at beginning of year
    
    
    15,250,488
    
    
    $
    0.52
    
    
    
    14,843,688
    
    
    $
    0.56
    
    
    
    10,557,568
    
    
    $
    0.84Granted
    
    
    700,000
    
    
    $
    1.07
    
    
    
    3,848,000
    
    
    $
    1.07
    
    
    
    2,820,840
    
    
    $
    1.79Exercised
    
    
    (473,000
    )
    
    $
    0.17
    
    
    
    (7,746,280
    )
    
    $
    0.42
    
    
    
    (829,670
    )
    
    $
    0.69Forfeited
    
    
    (633,800
    )
    
    $
    0.69
    
    
    
    (387,840
    )
    
    $
    0.87
    
    
    
    (138,760
    )
    
    $
    1.00Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (970,000
    )
    
    $
    2.81Outstanding at end of year
    
    
    14,843,688
    
    
    $
    0.56
    
    
    
    10,557,568
    
    
    $
    0.84
    
    
    
    11,439,978
    
    
    $
    0.91Shares exercisable at end of year
    
    
    11,705,508
    
    
    $
    0.43
    
    
    
    5,939,888
    
    
    $
    0.68
    
    
    
    7,903,538
    
    
    $
    0.80
 The following table summarizes information with respect to stock options outstanding at
December 31, 2008:
 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
    
    
    2008
    
    
    exercisable
    
    
    price
    
    
    2008Ordinary shares$0.16
    
    
    2,974,738
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,826,738$1.04
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000$1.31
    
    
    1,596,920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,596,920$1.32
    
    
    27,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,000$1.12
    
    
    400,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,000$1.16
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000$1.07
    
    
    700,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700,000$0.96
    
    
    2,942,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,694,240$1.25
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,000$1.32
    
    
    135,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,200$2.03
    
    
    309,840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,120$2.19
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,320$0.72
    
    
    1,850,840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,439,978
    
    
    5.81 years
    
    
    $
    0.91
    
    
    $
    5,937,590
    
    
    
    7,903,538
    
    
    $
    0.80
    
    
    $
    4,912,983
 The weighted-average grant-date fair value of options granted during the years 2006, 2007
and 2008 was $0.63, $0.64 and $1.04, respectively. The total intrinsic value of options
exercised during the years ended December 31, 2006, 2007 and 2008 was $796,348, $25,541,496,
and $594,813, respectively.
 F-40




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 10.
    
    STOCK OPTIONS AND NONVESTED SHARES  continued2004 Stock incentive plan continuedSummary of stock options to employees and non-employees  continuedAs of December 31, 2008, options to purchase 297,560 ordinary shares were available for
future grant. The Company recognized share-based compensation expenses of $1,183,662,
$1,803,107 and $1,217,980 for stock option in the years ended December 31, 2006, 2007 and
2008, respectively.The Company recognizes the compensation costs net of a forfeiture rate. The estimate of
forfeitures will be adjusted over the requisite service period to the extent that actual
forfeitures differ or are expected to differ, from such estimate. Changes in estimated
forfeitures will be recognized through a cumulative catch-up adjustment in the period of
change and will also impact the amount of stock compensation expense to be recognized in the
future periods.2007 Equity incentive planIn July 2007, the Company adopted the 2007 Equity incentive plan (the 2007 Plan) and
granted nonvested shares covering 10,558,493 ordinary shares of the Company to the employees
who are eligible for the 2007 Plan. The vesting of the nonvested shares are subject to
achieving certain financial performance targets and rendering service to the Company for the
requisite service period stated in the 2007 Plan.The grant date fair value of a nonvested share is measured at the quoted market price of the
Companys equity shares. The nonvested shares shall become vested during the three years
following the grant date based on the Companys certain annual operating performance goals
for the years 2008 and 2009. Based on the Companys operating performance during 2008,
4,329,024 shares were vested as of December 31, 2008. The Company recognized a compensation
expense of $1,143,233 and $6,822,170 for the nonvested shares in 2007 and 2008,
respectively.
 F-41




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 10.
    
    STOCK OPTIONS AND NONVESTED SHARES  continued2007 Equity incentive plan continuedA summary of the status of the nonvested shares as of December 31, 2007 and 2008, and
changes during the year ended December 31, 2008 is presented below.
 Weighted-average
    
    Aggregategrant date
    
    intrinsicNonvested shares
    
    Shares
    
    fair value
    
    valueAt the beginning of year 2007
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    10,558,493
    
    
    
    1.84Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    At the end of year 2007
    
    
    10,558,493
    
    
    
    1.84
    
    
    
    46,246,199Granted
    
    
    
    
    
    
    
    
    
    
    Vested
    
    
    (4,329,024
    )
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    At the end of year 2008
    
    
    6,229,469
    
    
    
    1.84
    
    
    
    8,758,633
 As of December 31, 2008, there was $8.0 million of total unrecognized compensation cost
related to nonvested share-based compensation arrangements granted under the 2007 Plan.
That cost is expected to be recognized over a weighted-average period of 1.5 years.11.
    
    INCOME TAXESChina Finance Online, Daily Growth Futures, Daily Growth Wealth Management, CFO Asiaciti,
CFO Kingford, CFO Team Gear, CFO Kinco and CFO Danford have not recorded tax provision for
Hong Kong profits tax as these companies have no assessable profits arising in or derived
from Hong Kong. CFO Daily Growth is subject to Hong Kong Profits Tax at a rate of 16.5%.
For the year ended 2008, income tax benefit $20,972 for CFO Daily Growth has been made in
the consolidated financial statements.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 11.
    
    INCOME TAXES  continuedDaily Growth Holdings, CFO Giant Bright, CFO Mainfame, CFO Manca and CFO Mount First are
tax-exempted companies incorporated in the British Virgin Islands.Under the new EIT law and its implementing rules, preferential tax treatments may continue
to be granted to industries and projects that are strongly supported and encouraged by the
state. Enterprises otherwise classified as High and New Technology Enterprises strongly
supported by the state, such as CFO Software, CFO Meining and CFO Genius, are
entitled to preferential EIT rate which has the effect of
 
    
    providing CFO Software tax exemption for the year 2007 and a reduced tax rate of 7.5%
for the years 2008, 2009 and 2010; and
    
    Providing CFO Meining and CFO Genius a reduced tax rate of 15% for the years 2008,
2009 and 2010.
 Under the new EIT law and its implementing rules, enterprises that are classified as
New Software Manufacture Enterprises are entitled to be exempted from EIT tax for the
first two profit-making years and enjoy a preferential 12.5% tax rate, which is half of
the standard EIT rate of 25% for the three years thereafter. CFO Success and CFO
Zhengning based on their status as New Software Manufacture Enterprise are entitled to
enjoy preferential tax treatments, which has the effect of
 
    
    providing CFO Success tax exemption for the years 2008 and 2009 and a preferential
EIT rate of 12.5% for the years 2010, 2011 and 2012.
    
    Providing CFO Zhengning tax exemption for the year 2008 and a preferential EIT rate
of 12.5% for the years 2009, 2010 and 2011.
 CFO Stockstar, CFO Jujin, CFO Newrand and CFO Newrand Training are entitled to enjoy a
reduced tax rate of 18%, 20%, 22% and 24% for the year 2008, 2009, 2010 and 2011 respectively
and eventually transition to the standard 25% in 2012.CFO Beijing, CFO Wisdom, CFO Fuhua, CFO Premium, CFO Glory, CFO Zhengtong, CFO Zhengyong, CFO Chongzhi,
CFO Shangtong, CFO Huifu, CFO Zhongcheng, and CFO Juda are subject to a uniform tax rate of
25%. The taxable income of CFO Chongzhi and CFO Zhongcheng are treated as 10% of their gross
revenues.On March 16, 2007, the National Peoples Congress adopted the Enterprise Income Tax Law (the
EIT Law), which became effective on January 1, 2008 and replaced the existing separate
income tax laws for domestic enterprises and foreign-invested enterprises, by adopting
unified income tax rate of 25% for most enterprises.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 11.
    
    INCOME TAXES  continuedIn accordance with the implementation rules of the New Income Tax Law, the Groups various
PRC subsidiaries such as CFO Software and CFO Meining that previously qualified for high
and new technology enterprise (hereafter HNTE ) and were granted the preferential tax
treatments may not continue to qualify as HNTE strongly supported by the State under the
new rules. However, in 2008 the Groups three PRC subsidiaries, including CFO Software, CFO
Meining and CFO Genius have been newly announced as HNTE by the PRC tax authority, and
therefore they are still subject to the income tax rate of 15%. CFO Software was subject to
half tax rate of 7.5%. The HNTE status would allow qualified China based enterprises to use
a 15% tax rate for three years. At the conclusion of the three year period, the qualified
enterprises have the option to renew for an additional three years through a simplified
application process if the companys business operations continue to qualify for HNTE
status. After the first six years, enterprises would have to go through a new application
process in order to renew their HNTE status.The EIT Law includes a provision specifying that legal entities organized outside of China
will be considered residents for Chinese income tax purposes if their place of effective
management or control is within China. If legal entities organized outside China were
considered residents for Chinese income tax purpose, they would become subject to the EIT
Law on their worldwide income. This would cause any income legal entities organized outside
China earned to be subject to Chinas 25% EIT. The Implementation Rules to the EIT Law
provide that non-resident legal entities will be considered China residents if substantial
and overall management and control over the manufacturing and business operations,
personnel, accounting, properties, etc. occurs within China. Pursuant to the additional
guidance released by the Chinese government on April 22, 2009, management does not believe
that the legal entities organized outside China should be characterized as China tax
residents for EIT Law purposes.Under the PRC tax laws effective prior to January 1, 2008, dividends paid to foreign
investors by foreign-invested enterprises, such as dividends paid to the overseas holding
companies by the PRC subsidiaries, were exempt from PRC withholding tax. Under the EIT Law
and its implementation rules which became effective on January 1, 2008, dividends generated
after January 1, 2008 and payable by a foreign-invested enterprise in China to its foreign
investors who are non-resident enterprises is subject to the withholding tax of 10% and in
the case of subsidiary 25% or more directly owned by the resident in Hong Kong, the
withholding tax would be 5%.Aggregate undistributed earnings of the Groups subsidiaries located in PRC that are taxable
upon distribution to the Group are considered to be indefinitely reinvested under APB
opinion No. 23, Accounting for Income Taxes-Special Areas, because the Group does not have
any present plan to pay any cash dividends on its ordinary shares in the foreseeable future
and intends to retain most of its available funds and any future earnings for use in the
operation and expansion of its business. Accordingly, no deferred tax liability has been
accrued for the Chinese dividend withholding taxes that would be payable upon the
distribution of those amounts to the Company as of December 31, 2008.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 11.
    
    INCOME TAXES  continuedIncome tax (provision) benefit was as follows:
 December 31,2006
    
    
    2007
    
    
    2008Current
    
    $
    626
    
    
    $
    70,913
    
    
    $
    (153,261
    )Deferred
    
    
    40,081
    
    
    
    737,712
    
    
    
    3,200,390Total
    
    $
    40,707
    
    
    $
    808,625
    
    
    $
    3,047,129
 The principal components of deferred income taxes were as follows:
 December 31,2007
    
    
    2008Current deferred tax assets:Deferred revenue  current
    
    $
    841,315
    
    
    $
    1,873,600Accrued expenses and other liability
    
    
    288,200
    
    
    
    50,706Net operating loss carrying forwards
    
    
    
    
    
    
    601,217Total current deferred tax assets
    
    $
    1,129,515
    
    
    $
    2,525,523Non-current deferred tax liabilities:Intangible assets
    
    
    (321,816
    )
    
    
    (622,005
    )Property and equipment
    
    
    (30,457
    )
    
    
    (794
    )Total non-current deferred tax liabilities
    
    
    (352,273
    )
    
    $
    (622,799
    )Non-current deferred tax assets:Deferred revenue  non-current
    
    $
    14,382
    
    
    $
    1,167,931Net operating loss carrying forwards
    
    
    1,136,729
    
    
    
    1,367,919Less: valuation allowance
    
    
    (1,136,729
    )
    
    
    (781,716
    )Total non-current deferred tax assets, net
    
    $
    14,382
    
    
    $
    1,754,134
 A valuation allowance of $1,136,729 and $781,716 were established as of December 31, 2007
and 2008, respectively, for the entities that have incurred losses because the Group
believes that it is more likely than not that the related deferred tax assets will not be
realized in the future. At December 31, 2008, tax loss carry forwards includes
approximately $6.7 million which will expire by 2013, and $3.6 million which will carry
forward indefinitely.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 11.
    
    INCOME TAXES  continuedDuring the years ended December 31, 2006, 2007 and 2008, if the China Finance Onlines
subsidiaries in the PRC were neither in the tax holiday period nor had they been
specifically allowed special tax concessions, they would have recorded additional income tax
expense of $786,385, $4,414,697 and $11,660,280 respectively. The basic income per share
would have been ($0.01), ($0.09) and $0.07, and the diluted income per share would have been
($0.01), ($0.09) and $0.07 for the years ended December 31, 2006, 2007 and 2008,
respectively.The decrease in valuation allowance from 2007 to 2008 was primarily due to the reversal of
valuation allowance arising from net operating loss carrying forward that the Groups
management believes are realizable in the near future.A reconciliation between the statutory PRC enterprise income tax rate of 25% and the
effective tax rate is as follows:
 Years ended December 31,2006
    
    2007
    
    2008%
    
    %
    
    %Statutory tax rate in PRC
    
    
    (33.0
    )
    
    
    (33.0
    )
    
    
    25.0Effect of tax holiday
    
    
    (92.1
    )
    
    
    (91.8
    )
    
    
    (73.0
    )Non-deductible expenses
    
    
    139.9
    
    
    
    99.7
    
    
    
    39.0Non-taxable income
    
    
    (54.8
    )
    
    
    (16.7
    )
    
    
    (7.9
    )Effect on deferred taxes due to changes in
tax rates under the new law for certain
subsidiaries
    
    
    
    
    
    
    18.5
    
    
    
    Change in valuation allowance
    
    
    33.7
    
    
    
    7.0
    
    
    
    (2.2
    )Effective tax rate
    
    
    (6.3
    )
    
    
    (16.3
    )
    
    
    (19.1
    )
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 12.
    
    SHAREHOLDERS EQUITYIn October 2005, the Group issued 2,000,000 ordinary shares to its American Depositary
Receipt bank and in exchange received 400,000 American depositary shares (ADSs) for
purposes of future exercise of share options by employees.As of December 31, 2006, all 400,000 ADSs had been issued to employees who exercised their
options. In January 2006, the Group issued 3,000,000 ordinary shares to its American
Depositary Receipt bank and in exchange received 600,000 ADSs for purposes of future
exercise of share options by employees.As of December 31, 2007, 905,256 ADSs had been issued to employees and the remaining 94,744
ADSs continued to be held by the Group for future exercises. These 94,744 ADSs represent
473,720 ordinary shares of the Group, which are considered as issued and outstanding as of
December 31, 2007.As of December 31, 2008, the remaining ADS carried from year 2007 were used for option
exercise. No ADS is outstanding for potential exercising of option.Repurchased sharesIn 2005, the Group repurchased 10,708,030 ordinary shares at prices ranging from $1.13 to
$1.41 per share, including brokerage commission, for a total consideration of $13,200,394.
In 2007, the Group granted 10,558,493 nonvested shares to BVI companies out of the
repurchased shares. Therefore there were 149,537 repurchased shares at the end of 2007. In
2008, 95,950 repurchased shares were used for option exercised by employees. Therefore the
number of the remaining repurchased share as of December 31, 2008 is 53,587 shares.13.
    
    OTHER (EXPENSES) INCOME, NETOther (expenses) income, net consisted of:
 2006
    
    
    2007
    
    
    2008Gain on partial disposal of an
investment in Moloon (see Note 5)
    
    
    116,071
    
    
    
    
    
    
    
    Others
    
    
    (1,498
    )
    
    
    8,731
    
    
    
    (168,536
    )$
    114,573
    
    
    $
    8,731
    
    
    $
    (168,536
    )
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 14.
    
    INCOME (LOSS) PER SHAREThe following table sets forth the computation of basic and diluted income (loss) per share
for the years indicated:
 Years ended December 31,2006
    
    
    2007
    
    
    2008Net income (loss) attributable to ordinary
shareholders, basic and diluted
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )
    
    $
    19,020,115Weighted average ordinary shares
outstanding used in computing
basic net income per share
    
    
    93,650,653
    
    
    
    94,500,529
    
    
    
    98,957,993Plus: Incremental shares from assumed
conversions of stock options and
nonvested shares
    
    
    
    
    
    
    
    
    
    
    14,026,539Weighted average ordinary shares
outstanding used in computing
diluted net income per share (note)
    
    
    93,650,653
    
    
    
    94,500,529
    
    
    
    112,984,532Net income (loss) per share-basic
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.19Net income (loss) per share-diluted
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.17
 Actual ordinary shares issued and upon exercises of options are included when calculating
weighted average ordinary shares outstanding used in computing basic net income per share.
  (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, 2,526,280 shares out
of such 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.
As of December 2008, all the remaining shares have been issued to the employees for
exercise of option.(2)
    
    In July 2007, the Company granted nonvested shares covering 10,558,493 ordinary
shares of the Company to the employees who are eligible for the 2007 Plan. The vesting
of the nonvested shares is subject to achieving certain financial performance targets
stated in the 2007 Plan. Nonvested shares are not included in the computation of basic
earnings per share as such shares may be returned to the Company if the employee does
not render the requisite service, the shares are returned to the Company.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 14.   INCOME (LOSS) PER SHARE  continued
  (3)
    
    The Group has options and nonvested 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 ended December 31, 2006, 2007 and
2008, as their effects would have been auti-dilutive. Such outstanding options and
nonvested shares consist of 15,950,488 options for the year ended December 31, 2006,
18,691,688 options and 10,558,493 nonvested shares for the year ended December 31,
2007, and 1,491,776 options and zero of nonvested share for the year ended December 31,
2008.
 15.
    
    MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATIONFull time employees of the Group in the PRC participate in a government-mandated
multi-employer defined contribution plan pursuant to which certain pension benefits, medical
care, unemployment insurance, employee housing fund and other welfare benefits are provided
to employees. Chinese labor regulations require the Group to accrue for these benefits
based on certain percentages of the employees salaries. The total provisions for such
employee benefits were $270,576, $948,100 and $1,913,046 for the years ended December 31,
2006, 2007 and 2008 respectively.
 16.
    
    COMMITMENTSThe Group leases certain office premises and purchases data under non-cancelable leases.
The office lease expires in 2012. Rent expense under operating leases for 2006, 2007 and
2008 were $520,590, $1,057,624 and $2,038,449, respectively.Future minimum lease payments under non-cancelable operating leases and data purchase
agreements were as follows:
 Year ending2009
    
    
    2,406,4512010
    
    
    1,359,9622011
    
    
    451,7022012
    
    
    24,467Total
    
    $
    4,242,582
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 17.
    
    SEGMENT AND GEOGRAPHIC INFORMATIONThe Group has two principal operating segments (1) online financial data subscription
service and other related services, (2) brokerage service. These operating segments were
determined based on the nature of the services offered. Operating segments are defined as
components of an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision-maker in deciding how to allocate
resources and in assessing performance. The Groups chief executive officer and chief
operating officer have been identified as the chief operating decision makers. The Groups
chief operating decision makers direct the allocation of resources to operating segments
based on the profitability and cash flows of each respective segment.The Group evaluates performance based on several factors, including net revenue, cost of
revenue, operating expenses, income from operation. The accounting policies of the business
segments are the same as those described in Note 2: Summary of Significant Accounting
Policies. The following tables show the operations of the Groups operating segments:
 For the year ended December 31, 2008
 Subscriptionservices andother related
    
    
    Brokerageservices
    
    
    services
    
    
    ConsolidatedNet revenue
    
    $
    55,286,219
    
    
    $
    956,549
    
    
    $
    56,242,768Cost of revenue
    
    
    (9,181,922
    )
    
    
    (185,221
    )
    
    
    (9,367,143
    )Operating expenses:General and administrative
    
    
    (14,055,716
    )
    
    
    (1,315,455
    )
    
    
    (15,371,171
    )Product development
    
    
    (5,635,173
    )
    
    
    
    
    
    
    (5,635,173
    )Sales and marketing
    
    
    (13,342,967
    )
    
    
    (177,328
    )
    
    
    (13,520,295
    )Total operating expenses
    
    
    (33,033,856
    )
    
    
    (1,492,783
    )
    
    
    (34,526,639
    )Government subsidies
    
    
    436,946
    
    
    
    
    
    
    
    436,946Income (loss) from operations
    
    
    13,507,387
    
    
    
    (721,455
    )
    
    
    12,785,932Total assets
    
    
    124,128,214
    
    
    
    17,695,097
    
    
    
    141,823,311
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(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 expenses:General 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
 The Group started to provide brokerage service after the acquisition of CFO Daily Growth in
2007 and therefore only had one segment in 2006.The Group derives revenue from external customers for each of the following services during
the years presented:
 Years ended December 31,2006
    
    
    2007
    
    
    2008Subscription fees
    
    $
    5,075,830
    
    
    $
    22,712,043
    
    
    $
    49,551,711Advertising revenue
    
    
    1,337,630
    
    
    
    1,560,194
    
    
    
    2,946,389SMS revenue
    
    
    298,232
    
    
    
    1,339,321
    
    
    
    1,047,218Brokerage service revenue
    
    
    
    
    
    
    80,896
    
    
    
    956,549Others
    
    
    416,386
    
    
    
    210,620
    
    
    
    1,740,901Total revenue from external customers
    
    $
    7,128,078
    
    
    $
    25,903,074
    
    
    $
    56,242,768
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  continued
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars)
 18.
    
    RESTRICTED NET ASSETSPRC legal restrictions permit payments of dividends by China Finance Onlines PRC
subsidiaries only out of their retained earnings, if any, determined in accordance with PRC
accounting standards and regulations. The general reserve, which requires annual
appropriations of 10% of after-tax profit should be set aside prior to the payment of
dividends. As a result of these PRC laws and regulations, the Groups PRC subsidiaries and
variable interest entities are restricted in their abilities to transfer a portion of their
net assets to the Group. As of December 31, 2008, the amount of restricted net assets was
approximately $56,206,769.Pursuant to the laws applicable to the PRCs Foreign Investment Enterprises, the Groups
subsidiaries in the PRC must make appropriations from after-tax profit to non-distributable
reserves as determined by the board of directors of the these subsidiaries. These reserves
include a (i) general reserve, (ii) enterprise expansion reserve, and (iii) staff bonus and
welfare reserve. Subject to certain cumulative limits, the general reserve requires annual
appropriations of 10% of after-tax profit (as determined under PRC GAAP at each year-end);
amounts to be appropriated for the other two reserves are determined at the board of
directors discretion. These reserves can only be used for specific purposes and are not
distributable as cash dividends. Appropriation to the general reserve amounted to $nil,
$3,709,549 and $3,335,073 in 2006, 2007 and 2008, respectively. There were no
appropriations to the staff welfare and bonus reserve or the general reserve during 2006,
2007 and 2008.19.
    
    SUBSEQUENT EVENTIn January, 2009, CFO Software acquired 100% of the equity interest in Guangzhou Boxin
Consulting Co., Ltd (CFO Boxin) through two PRC citizens, respectively. CFO Software
signed a series of contractual agreements with CFO Boxin and its shareholders that provide
the Group with the substantial ability to control CFO Boxin. For the acquisition, the total
cash consideration was $585,146, of which, $555,889 was paid in 2009 with the remaining
consideration of $29,257 to be paid within the next twelve months.
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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 31,2007
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    19,374,617
    
    
    $
    4,435,407Amounts due from subsidiaries
    
    
    4,408,362
    
    
    
    18,388,250Prepaid expenses and other current assets
    
    
    133,572
    
    
    
    48,877Dividends receivable
    
    
    
    
    
    
    25,858,199Total current assets
    
    
    23,916,551
    
    
    
    48,730,733Investments in subsidiaries
    
    
    43,844,335
    
    
    
    47,021,860Cost-method investment
    
    
    1,479,571
    
    
    
    1,479,571Goodwill
    
    
    50,534
    
    
    
    50,534Total assets
    
    $
    69,290,991
    
    
    $
    97,282,698Liabilities and shareholders equityCurrent liabilities:Accrued expenses and other current liabilities
    
    
    1,868,059
    
    
    
    327,021Amounts due to a subsidiary
    
    
    60,537
    
    
    
    13,322Total current liabilities
    
    $
    1,928,596
    
    
    $
    340,343Shareholders equityOrdinary shares ($0.00013 par value; 500,000,000 shares
authorized; shares issued and outstanding 104,384,933
in 2006, 109,754,433 in 2007 and 110,014,433 in 2008)
    
    
    14,172
    
    
    
    14,206Additional paid-in capital
    
    
    58,727,378
    
    
    
    67,340,543Accumulated other comprehensive income
    
    
    4,501,432
    
    
    
    6,448,078Retained earnings
    
    
    4,119,413
    
    
    
    23,139,528Total shareholders equity
    
    
    67,362,395
    
    
    
    96,942,355Total liabilities and shareholders equity
    
    $
    69,290,991
    
    
    $
    97,282,698
 F-53




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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 31,2006
    
    
    2007
    
    
    2008Operating expenses:General and administrative
    
    $
    873,496
    
    
    $
    975,931
    
    
    $
    577,934Stock-based compensation
    
    
    1,183,662
    
    
    
    2,946,340
    
    
    
    8,040,150Total operating expenses
    
    
    2,057,158
    
    
    
    3,922,271
    
    
    
    8,618,084Interest income
    
    
    202,484
    
    
    
    253,003
    
    
    
    50,970Equity in earnings of subsidiaries and VIEs
    
    
    2,395,622
    
    
    
    10,299,974
    
    
    
    25,997,391Exchange gain
    
    
    64,348
    
    
    
    365,135
    
    
    
    1,589,838Other income
    
    
    116,071
    
    
    
    1,455
    
    
    
    Loss from impairment of cost method
investment
    
    
    (1,322,000
    )
    
    
    (11,127,000
    )
    
    
    Net income (loss)
    
    $
    (600,633
    )
    
    $
    (4,129,704
    )
    
    $
    19,020,115
 F-54




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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)
 Accumulated otherAdditional
    
    
    comprehensive
    
    
    
    
    
    
    TotalOrdinary shares
    
    
    paid-in
    
    
    income
    
    
    Retained
    
    
    shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    capital
    
    
    (loss)
    
    
    earnings
    
    
    equity
    
    
    incomeBalance as of January 1, 2006
    
    
    101,329,933
    
    
    
    13,077
    
    
    
    51,297,011
    
    
    
    671,122
    
    
    
    8,849,750
    
    
    
    60,830,960
    
    
    $
    5,295,320Issuance of ordinary shares for exercise of
share 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 share 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
    )Exercise of share option by employees
    
    
    
    
    
    
    
    
    
    
    531,449
    
    
    
    
    
    
    
    
    
    
    
    531,449Exercise of share options by non-employees
    
    
    260,000
    
    
    
    34
    
    
    
    41,566
    
    
    
    
    
    
    
    
    
    
    
    41,600Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8,040,150
    
    
    
    
    
    
    
    
    
    
    
    8,040,150Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,946,646
    
    
    
    
    
    
    
    1,946,646
    
    
    $
    1,946,646Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,020,115
    
    
    
    19,020,115
    
    
    
    19,020,115Balance as of December 31, 2008
    
    
    110,014,433
    
    
    $
    14,206
    
    
    $
    67,340,543
    
    
    $
    6,448,078
    
    
    $
    23,139,528
    
    
    $
    96,942,355
    
    
    $
    20,966,761
  F-55




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##### Table of Contents



Financial information of Parent Company
Statements of cash flows
(In U.S. dollars, except share-related data)
 December 31,2006
    
    
    2007
    
    
    2008Operating activities:Net income (loss)
    
    
    (600,633
    )
    
    
    (4,129,704
    )
    
    
    19,020,115Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating activities:Stock-based compensation
    
    
    1,183,662
    
    
    
    2,946,340
    
    
    
    8,040,150Loss from impairment of cost method investment
    
    
    1,322,000
    
    
    
    11,127,000
    
    
    
    Gain from disposal of cost method investment
    
    
    (116,071
    )
    
    
    
    
    
    
    Equity in earnings of subsidiaries
    
    
    (958,872
    )
    
    
    (10,299,974
    )
    
    
    (25,997,391
    )Changes in assets and liabilities:Dividend receivable
    
    
    (2,473,269
    )
    
    
    2,473,269
    
    
    
    Prepaid expenses and other current assets
    
    
    (56,221
    )
    
    
    (39,954
    )
    
    
    84,695Amounts due from subsidiaries
    
    
    (64,543
    )
    
    
    (4,344,190
    )
    
    
    (15,071,573
    )Accrued expenses and other current liabilities
    
    
    27,032
    
    
    
    1,719,911
    
    
    
    (1,541,036
    )Amounts due to subsidiaries
    
    
    41,947
    
    
    
    3
    
    
    
    (47,217
    )Net cash used in operating activities
    
    
    (1,694,968
    )
    
    
    (547,299
    )
    
    
    (15,512,257
    )Investing activities:Net increase in loans to subsidiaries
    
    
    9,990,000
    
    
    
    4,000,000
    
    
    
    Proceeds from partial sale of cost method investment
    
    
    1,187,500
    
    
    
    
    
    
    
    Acquisition of businesses
    
    
    (6,582,144
    )
    
    
    (2,300,476
    )
    
    
    Investments in subsidiaries
    
    
    
    
    
    
    
    
    
    
    Acquisition of cost investment
    
    
    
    
    
    
    
    
    
    
    Net cash provided by investing activities
    
    
    4,595,356
    
    
    
    1,699,524
    
    
    
    Financing activities:Proceeds from stock options exercised by employees
    
    
    66,843
    
    
    
    2,366,697
    
    
    
    531,449Proceeds from exercise of options granted to non-employee
    
    
    8,800
    
    
    
    859,120
    
    
    
    41,600Dividend from a subsidiary
    
    
    
    
    
    
    9,238,436
    
    
    
    Net cash provided by financing activities
    
    
    75,643
    
    
    
    12,464,253
    
    
    
    573,049Effect of exchange rate changes
    
    
    5
    
    
    
    76
    
    
    
    (2
    )Net increase (decrease) in cash and cash equivalents
    
    
    2,976,036
    
    
    
    13,616,554
    
    
    
    (14,939,210
    )Cash and cash equivalents, beginning of the year
    
    
    2,782,027
    
    
    
    5,758,063
    
    
    
    19,374,617Cash and cash equivalents, end of the year
    
    $
    5,758,063
    
    
    $
    19,374,617
    
    
    $
    4,435,407
  Basis for preparation
  F-56