##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
 (Mark One)
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 For the transition period from to
 Commission file number 000-29008
 CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 
 
 
 
  
 tairan.guo@chinactdc.com
 
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, Par Value US$0.01 per share
    
    Nasdaq Capital Market
  
  
   o þ
 o þ
 þ o
  o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o  U.S. GAAP þ
    
    International Financial Reporting Standards as
issued by the International Accounting Standards Board o
    
    Other o
  Item 17 o
    
    Item 18 o
 o þ




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##### 



TABLE OF CONTENTS
  
 PART I
    
    
    2Item 1. Identity of Directors, Senior Management and Advisers
    
    
    2Item 2. Offer Statistics and Expected Timetable
    
    
    2Item 3. Key Information
    
    
    2Item 4. Information on the Company
    
    
        16Item 4A. Unresolved Staff Comments
    
    
        25Item 5. Operating and Financial Review and Prospects
    
    
        26Item 6. Directors, Senior Management and Employees
    
    
        36Item 7. Major Shareholders and Related Party Transactions
    
    
        44Item 8. Financial Information
    
    
        47Item 9. The Offer and Listing
    
    
        48Item 10. Additional Information
    
    
        49Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
        58Item 12. Description of Securities Other than Equity Securities
    
    
        59PART II
    
    
        60Item 13. Default, Dividend Arrearages and Delinquencies
    
    
        60Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
        60Item 15T. Controls and Procedures
    
    
        60Item 16A. Audit Committee Financial Expert
    
    
        61Item 16B. Code of Ethics
    
    
        61Item 16C. Principal Accountant Fees and Services
    
    
        62Item 16D. Exemptions from the Listing Standards for Audit Committee
    
    
        63Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
    
    
        63Item 16F. Change in Registrants Certifying Accountant
    
    
        63Item 16G. Corporate Governance
    
    
        63Item 17. Financial Statements
    
    
        64Item 18. Financial Statements
    
    
        64Item 19. Exhibits
    
    
        65SIGNATURES
    
    
    66EX-4.5   Translation of agreement with China Biotech Holdings Ltd.EX-8.1   List of Company's SubsidiariesEX-12.1  Certification of Chief Executive OfficerEX-12.2  Certification of Acting Chief Financial OfficerEX-13.1  Certification of Chief Executive and Acting Chief Financial OfficerEX-16.1   Letter of Deloitte Touche Tohmatsu CPA Ltd. regarding change in certifying accountantEX-23.1 Consent of Deloitte Touche Tohmatsu CPA Ltd. to the incorporation by reference in the registration statements on Form S-8EX-23.2  Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company to the incorporation by reference in the registration statements on Form S-8




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##### Table of Contents



Introduction
    
    
    CTDC, the Company, us or we refer to China Technology Development Group Corporation
and the Group refers to the Company and all of its subsidiaries as a whole. The term you
refers to holders of our common stock and/or preferred stock;
    
    Hong Kong and the Government refer to the Hong Kong Special Administrative Region of
the Peoples Republic of China and its government, respectively;
    
    China and the Chinese government refer to the Peoples Republic of China, or PRC, and
its government, respectively; and
    
    All references to Renminbi, or Rmb 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.
    1




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##### Table of Contents



PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 A. Selected financial data.
  2




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(Amounts in thousands, except share and per share data)Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009Rmb(1)
    
    
    Rmb(1)
    
    
    Rmb(1)
    
    
    Rmb(1)
    
    
    Rmb(1)
    
    
    US$Consolidated Statement of
Operations Data:Revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    Cost of sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    Gross loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    Operating loss
    
    
    (13,407
    )
    
    
    (30,785
    )
    
    
    (24,495
    )
    
    
    (24,338
    )
    
    
    (32,331
    )
    
    
    (4,736
    )Other income (expense) :Interest income
    
    
    226
    
    
    
    182
    
    
    
    827
    
    
    
    79
    
    
    
    7
    
    
    
    1Finance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (475
    )
    
    
    (5,799
    )
    
    
    (849
    )(Loss) gain on disposal of
available-for-sale securities
    
    
    (2,596
    )
    
    
    (488
    )
    
    
    15,405
    
    
    
    (14,049
    )
    
    
    111
    
    
    
    16Impairment on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,213
    )
    
    
    
    
    
    
    Impairment on other investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (571
    )
    
    
    (84
    )Dividend income from
available-for-sale securities
    
    
    115
    
    
    
    4
    
    
    
    58
    
    
    
    48
    
    
    
    71
    
    
    
    10Change in fair value of
derivative embedded in
convertible note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,040
    )
    
    
    (738
    )Change in fair value of
warrants and option rights
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,236
    )
    
    
    3,798
    
    
    
    556Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,434
    )
    
    
    (503
    )Subsidies from government
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    88Exchange loss
    
    
    
    
    
    
    
    
    
    
    (482
    )
    
    
    (268
    )
    
    
    (218
    )
    
    
    (32
    )Others, net
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (36
    )
    
    
    (2
    )
    
    
    Loss from continuing operations
    
    
    (15,662
    )
    
    
    (31,087
    )
    
    
    (9,084
    )
    
    
    (54,776
    )
    
    
    (42,696
    )
    
    
    (6,255
    )(loss) profit from discontinued
operations
    
    
    (3,870
    )
    
    
    (83,499
    )
    
    
    1,973
    
    
    
    858
    
    
    
    4,227
    
    
    
    619Net loss
    
    
    (19,532
    )
    
    
    (114,586
    )
    
    
    (7,111
    )
    
    
    (53,918
    )
    
    
    (38,469
    )
    
    
    (5,636
    )Net loss per share
    
    
    (2.67
    )
    
    
    (10.13
    )
    
    
    (0.50
    )
    
    
    (3.34
    )
    
    
    (2.42
    )
    
    
    (0.35
    )Net loss per share from
continuing operations
    
    
    (2.14
    )
    
    
    (2.75
    )
    
    
    (0.64
    )
    
    
    (3.39
    )
    
    
    (2.68
    )
    
    
    (0.39
    )Net (loss) earnings per share
from discontinued operations
    
    
    (0.53
    )
    
    
    (7.38
    )
    
    
    0.14
    
    
    
    0.05
    
    
    
    0.26
    
    
    
    0.04Basic weighted average common
shares outstanding:
    
    
    7,326,497
    
    
    
    11,311,888
    
    
    
    14,249,051
    
    
    
    16,160,172
    
    
    
    15,927,168
    
    
    
    15,927,168
 3




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##### Table of Contents



(Amounts in thousands, except share data)As of December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$Consolidated
Balance Sheet Data:Total assets
    
    
    117,849
    
    
    
    64,751
    
    
    
    115,888
    
    
    
    62,619
    
    
    
    119,435
    
    
    
    17,494Total liabilities
    
    
    13,626
    
    
    
    14,111
    
    
    
    35,699
    
    
    
    20,389
    
    
    
    21,734
    
    
    
    3,184Shareholders equity
    
    
    98,708
    
    
    
    50,640
    
    
    
    80,189
    
    
    
    42,230
    
    
    
    97,701
    
    
    
    14,310Number of common
shares issued and
outstanding
    
    
    11,274,497
    
    
    
    13,809,497
    
    
    
    15,028,665
    
    
    
    15,543,669
    
    
    
    19,300,390
    
    
    
    19,300,390
 4




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(1)
    
    During 2005, we disposed of the Zhuhai branch of Beijing BHL Networks Technology Co., Ltd, or
BBHL. Our management approved the disposal of our entire nutraceutical operations in April
2007. In April 2008, we disposed of Green Energy Industry Ltd, including its subsidiaries
Fullwing Ltd and Margot Ltd, to Harvest Time International Holding Ltd, an independent third
party, for cash consideration of HK$10,000. In December 2008, we entered into a sale and
purchase agreement to sell our wholly-owned subsidiary Jingle and its subsidiaries, BHLNet and
BBHL, which we refer to collectively as the Jingle Group, to Sentron Enterprises Limited, an
independent party, for cash consideration of HK$0.2 million. During 2008, we regarded Jingle
Group as discontinued operations pursuant to Accounting Standard Codification 205-20 (formerly
refer to SFAS 144 Discontinued operations). We reported the operating results of these
businesses from the beginning of the year up to the date of disposal and the loss resulted
from the disposal are reported in the year of disposal as discontinued operations (see Note 5
to our audited consolidated financial statements included elsewhere in this Annual Report). To
conform to the presentation of the current year, we reclassified the comparative operating
results of the discontinued operations for the years ended December 31, 2005, 2006, 2007, 2008
and 2009 as discontinued operations. Exchange Rate Information
   Average(1)
    
    High
    
    Low
    
    Period-end(Rmb per US$1.00)2004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.27652005
    
    
    8.1472
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.07022006
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.8041
    
    
    
    7.80412007
    
    
    7.5806
    
    
    
    7.7714
    
    
    
    7.2946
    
    
    
    7.29462008
    
    
    6.9193
    
    
    
    7.1818
    
    
    
    6.7899
    
    
    
    6.82252009
    
    
    6.8311
    
    
    
    6.8895
    
    
    
    6.7753
    
    
    
    6.8270December 2009
    
    
    6.8277
    
    
    
    6.8300
    
    
    
    6.8253
    
    
    
    6.8270January 2010
    
    
    6.8271
    
    
    
    6.8277
    
    
    
    6.8264
    
    
    
    6.8268February 2010
    
    
    6.8292
    
    
    
    6.8346
    
    
    
    6.8260
    
    
    
    6.8260March 2010
    
    
    6.8263
    
    
    
    6.8271
    
    
    
    6.8255
    
    
    
    6.8259April 2010
    
    
    6.8258
    
    
    
    6.8275
    
    
    
    6.8239
    
    
    
    6.8252May 2010
    
    
    6.8279
    
    
    
    6.8315
    
    
    
    6.8252
    
    
    
    6.8279
 5




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(1)
    
    Annual averages are calculated by averaging the rates on the last business day of each month
during the relevant year.  B. Capitalization and indebtedness.
  C. Reasons for the offer and use of proceeds.
  D. Risk factors.
   Risks Related to Our Company and Our Industry
 Our business strategy has evolved significantly over time, and our limited operating history in the
solar business may not serve as an adequate measure for our future results of operations.
  6




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We have incurred significant operating losses, and we do not know whether we will ever achieve or
sustain profitability.
  Operating lossYear
    
    (in thousands of Rmb)2005
    
    
    (13,407
    )2006
    
    
    (30,785
    )2007
    
    
    (24,495
    )2008
    
    
    (24,338
    )2009
    
    
    (32,331
    )
  
    
    the need to procure additional equipment at reasonable cost and on a timely basis;
    
    the need to raise additional funds to finance the construction and ramp-up of
production lines, which we may be unable to obtain on reasonable terms or at all;
    
    product upgrading or updating by us or our competitors;
    
    our competitors price changes;
    
    our research and development and marketing activities;
    
    our acquisition costs of new technology or businesses;
    
    employee wage pressure arising from increased competition for skilled employees and
increased governmental staff welfare regulations; and
    
    extraordinary costs incurred for any acquisitions or reductions in force.
  We expect that we will need to obtain additional financing to continue to operate our solar
business, including significant capital expenditures to increase our production capacity. If we
cannot obtain additional financing when we need it, our growth prospects and results of operations
for our solar business may be materially adversely affected.
  7




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
    
    the trading price of our common stock on Nasdaq;
    
    our future financial condition, results of operations and cash flows;
    
    general market conditions for financing activities by companies in the solar industry;
and
    
    economic, political and other conditions in China and elsewhere.
  We may not be able to implement our growth strategy and manage our planned solar business expansion
effectively.
   We may not be able to compete successfully in a competitive solar market against competitors with
greater resources and more advanced technologies.
  
    
    longer operating history;
    
    greater financial, technological, marketing, sales and other resources;
    
    profitable operations;
    
    superior product functionality in certain areas;
    
    greater name recognition;
    
    a broader range of products to offer; and
    
    a larger base of customers.
  8




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We may not be able to keep pace with the rapid technological changes in the solar market, new
competition, and new product developments.
  
    
    provide a broad range of reliable solar products at the lowest cost;
    
    timely develop and introduce new products incorporating technological advances;
    
    respond promptly to new customer requirements;
    
    comply promptly with evolving industry standards;
    
    control delays and cost overruns due to external factors beyond our control, such as
increases in raw materials prices and problems with equipment vendors;
    
    qualify for available government subsidies and incentives to support the development of
the solar energy industry; and
    
    execute our business strategy and expansion plan effectively.
 We may be unable to generate sales if demand for our solar products does not develop or takes
longer to develop than we currently expect.
  
    
    cost-effectiveness of solar products compared to non-alternative energy products;
    
    availability of government subsidies and incentives to support the development of the
solar industry;
    
    breakthroughs in other alternative energy technologies, such as wind power and biomass;
    
    price changes of conventional energy sources, such as oil and coal; and
    
    capital expenditures by solar products purchasers, which have decreased during the
current economic recession.
  If we are unable to attract, train and retain a skilled labor force, our business may be materially
adversely affected.
  9




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We plan to acquire new businesses, products and technologies in the solar industry. We may not be
able to complete these acquisitions or effectively integrate any acquired businesses, products and
technologies into our Company.
     
    
    difficulties assimilating and managing the operations, technologies, intellectual
property, products and personnel of any acquired business;
    
    diversion of management attention to business concerns of the acquired business from
that of our existing operations;
    
    declining employee morale and retention issues for employees of the acquired business;
    
    risk of litigation by terminated employees and contractors; and
    
    our lack of familiarity with other conditions and business practices of the acquired
business.
  10




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We intend to enter into the advertising and media business through our pending acquisition of
Xintang Media Technology (Beijing) Limited. We may not complete the Xintang acquisition, and we
have no experience in the advertising and media business.
  Unauthorized use of our intellectual property by third parties and any expenses incurred in
protecting our intellectual property rights may adversely affect our business.
   We have granted, and expect to continue to grant, stock options under our stock incentive option
plan, which could adversely impact our financial results.
  We have limited business insurance coverage and may incur losses resulting from product liability
claims, business disruption, litigation or natural disasters.
  11




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Risks Associated with Business Operation in China.
  We are subject to risks relating to changes of political and economic policies and conditions in
China.
  
    
    changes in government subsidies and economic incentives for the solar industry;
    
    adjustments in tax regulations;
    
    restrictions on currency conversion;
    
    changes in laws and regulations, or their interpretation;
    
    the imposition of confiscatory taxation;
    
    restrictions on imports and sources of supply;
    
    devaluations of currency; and
    
    the nationalization or other expropriation of private enterprises.
  We may experience foreign currency losses due to fluctuations in exchange rates.
  12




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We may have limited legal recourse under Chinese law if disputes arise under our contracts with
third parties.
   Our business may be adversely affected by Chinese government directives and regulations.
  Risks Associated with Investing in Our Common Stock.
 Our stock price has been and may continue to be volatile.
  13




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Our internal controls have been deficient historically and require improvement. If we fail to
maintain an effective system of internal controls, we may be unable to accurately report our
financial results or prevent fraud, and investor confidence and the market price of our common
shares may be adversely impacted.
   The sale or availability for sale of substantial amounts of our common stock could adversely affect
the market price of our common stock.
  
    
    In September 2008, we issued an aggregate of 498,338 shares of common stock and
warrants to purchase up to an additional 1,526,306 shares of common stock to investors. In
June 2009, we issued an additional 60,000 shares of common stock and warrants to purchase
an additional 90,000 shares of common stock to the same investors. In October 2009, we
issued 222,821 shares to the investors upon their exercise of Series B Warrants due to the
occurrence of the price reset event. If we issue common stock at a price less than $3.01
per share in the future, we may trigger the anti-dilution provisions embedded in these
warrants.
    
    In April 2009, one of our wholly owned subsidiaries, China Green Holdings, Ltd., issued
a US$10.0 million convertible note to an investor. In November 2009, the investor
exchanged the entire principal amount of the convertible note for 3,322,260 shares of our
common stock.
    
    In May 2010, we issued and sold 2,000,000 shares of common stock to China Wanhe
Investment Ltd. at a price of $3.01 per share in connection with a private placement.
  We believe that we may be
classified as a passive foreign investment company, or PFIC, which could result in
adverse U.S. tax consequences to U.S. investors.
   Rights of shareholders under British Virgin Islands law may be less than those of shareholders in
U.S. jurisdictions.
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As a foreign private issuer for purposes of U.S. securities laws, we are not subject to certain
rules promulgated by Nasdaq that other Nasdaq-listed issuers are required to comply with.
  
    
    our independent directors do not hold regularly scheduled meetings in executive session;
    
    the compensation of our executive officers is not determined by an independent committee
of the board or by the independent members of the board of directors, and our CEO may be present
and participate in the deliberations concerning his compensation;
    
    related party transactions are not required to be reviewed or approved by our audit
committee or other independent body of the board of directors; and
    
    we are not required to solicit shareholder approval of stock plans (including those in
which our officers or directors may participate), stock issuances that will result in a change in
control, the issuance of our stock in related party transactions or other transactions in which we
may issue 20% or more of our outstanding shares or below market issuances of 20% or more of our
outstanding shares to any person.
  Some information about us may be unavailable due to exemptions under applicable US securities laws
for a foreign private issuer.
 15




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
    
    the rules under the Securities Exchange Act of 1934, as amended, or Exchange Act,
requiring the filing with the Securities and Exchange Commission, or SEC, of quarterly reports on
Form 10-Q or current reports on Form 8-K;
    
    the provisions of Regulation FD aimed at preventing issuers from making selective
disclosures of material information;
    
    the provisions of the Exchange Act regulating the solicitation of proxies, consents or
authorizations in respect of a security registered under the Exchange Act; and
    
    the provisions of the Exchange Act requiring insiders to file public reports of their
stock ownership and trading activities and establishing insider liability for profits realized from
any short-swing trading transaction.
  
 Item 4. Information on the Company
 A. History and development of the Company.
   Prior Operations
   16




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17




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Solar Energy Operations
     Advertising and Media Operations
    18




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##### Table of Contents



B. Business overview.
 Company Overview
  Business Strategy
  
    
    Capitalize upon future growth of solar market in China.Since 2008, we have devoted our
resources to developing solar application projects in China. The Chinese government has
supported solar power electricity generation through a variety of recent policy measures.
We believe these measures will
 19




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stimulate the growth of the solar market in China. We plan
to continue to devote our financial, human and technical resources to develop
building-integrated photovoltaic, or BIPV, systems and solar plants in the Chinese market.
    
    Improve manufacturing technology and process through continuous innovation.We have
established a technical engineering team with strong research and development
capabilities. We commenced our initial production of SnO2 baseplates in September 2008 and
have filed an application with the national patent offices in China for a proprietary
technology that we utilized in key equipment of our TCO glass production line. In 2009,
our engineering team designed and developed a new production line for SnO2 base plates,
which is in test-running for the time being. We plan to continue to devote substantial
resources to our research and development efforts in order to optimize our manufacturing
technology and processes with an emphasis on improving our throughput, efficiency and
product performance.
    
    Leverage our access to low cost resources to reduce manufacturing and operating costs
while providing reliable solar products and services.As a China-based solar company, we
believe that we enjoy cost advantages, including convenient access to low-cost technical
expertise, labor, land and facilities, over some of our competitors. In response to the
impact posed by the global economic environment, we plan to leverage our competitive cost
advantage to further reduce our manufacturing and operating costs while providing reliable
solar products and services.
    
    Expand our customer base and develop our solar markets.We intend to expand the
customer base for our solar business both within and outside China. Our marketing and
sales strategy is based on the formation of strategic relationships with key partners,
including solar module distributors and solar farm developers. We believe that we have the
potential to ultimately serve as a provider of high value-added solar products and
solutions to our strategic partners.
    
    Implement acquisition growth strategy in the green energy industry.We intend to expand
our solar business through acquisitions of complementary companies and technologies. We
believe acquisitions will enable our company to complete the solar industry value chain
integration and become an integrated platform for solar energy products and applications.
We intend to evaluate potential acquisition targets through the following factors: (a)
capability for technology development and innovation; (b) distribution channels for
end-products; (c) revenues and cash-in flow; and (d) growth potential in the industry.
    
    Enter Chinas advertising and media industry.We intend to enter into the advertising
and media business through our pending acquisition of Xintang Media Technology (Beijing)
Limited. Our Board
of Directors determined to expand the scope of our business and, after considering a number
of potential businesses, we determined that the advertising and media business presented a
significant opportunity for our company. We believe that the diversification of our
business will result in, among other benefits, increased revenue stability and greater
access to Chinese government resources.
 Sales and Marketing
  Seasonal sales
  Source of raw materials
  20




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##### Table of Contents



Description of Products and Services
   Intellectual Property
    Competition
     Regulation
  Renewable Energy Law and Other Government Directives
 21




---



##### Table of Contents



Regulation of the Advertising and Media Industry
   
    
    the Foreign Investment Industrial Guidance Catalog (2007); and
    
    the Regulations for the Administration of Foreign-Invested Advertising Enterprises (2008).
  22




---



##### Table of Contents




    
    the Advertising Law (1994);
    
    the Administration Regulations of Advertising Industry (1987);
    
    the Implementation Rule of Advertising Industry Administration (2005); and
    
    the Measures on Administration of Advertising Operation Licenses (2004).
  Environmental Regulations
  Restriction on Foreign Investments
  Tax
     23




---



##### Table of Contents



C. Organizational structure.
  Country of
    
    OwnershipsName
    
    Function
    
    Incorporation
    
    Interest
    
    Direct ParentBHL Solar
Technology Company
Limited, or BHLHK
(formerly named as
BHL Networks
Technology Co.
Ltd.)
    
    cash management
vehicle
    
    Hong Kong
    
    
    100
    %
    
    CompanySino Solar Technology (HK)
Limited
    
    cooperation with HK
companies and
institutions
    
    Hong Kong
    
    
    100
    %
    
    Southwick
International LtdShenzhen Helios New
Energy Technology
Limited, or
Shenzhen Helios
Energy (formerly
named as Shenzhen
Innoessen Biotech
Inc.)
    
    management, sale
and marketing
office in southern
China
    
    China
    
    
    100
    %
    
    Southwick
International LtdChina Merchants
Zhangzhou
Development Zone
Trenda Solar Ltd. or
Zhangzhou Trenda
    
    manufactures SnO2
solar base plates
    
    China
    
    
    100
    %
    
    Trenda
International LtdChina Merchants
Zhangzhou
Development Zone
Trendar Solar Tech
Ltd., or Zhangzhou
Trendar Tech
    
    manufacturing base
and quality control
center
    
    China
    
    
    100
    %
    
    Sinofield Group LtdChina Merchants
Zhangzhou
Development Zone
Broad Shine Solar
Technology Limited,
or Broad Shine
    
    owns a five-story
plant as our
manufacturing site
and other
properties at China
Merchants Zhangzhou
Development Zone in
China
    
    China
    
    
    100
    %
    
    Faster Assets
 D. Property, plants and equipment.
    24




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##### Table of Contents



Item 4A. Unresolved Staff Comments
  25




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##### Table of Contents



Item 5. Operating and Financial Review and Prospects
 MANAGEMENTS DISCUSSION AND ANALYSIS
  Critical accounting policies and estimates
  Impairment on available- for- sales securities
  Impairment or disposal of long lived assets
   Stock-based compensation
  26




---



##### Table of Contents



Warrants and option rights
   Convertible note
  Recent accounting pronouncements
   27




---



##### Table of Contents



28




---



##### Table of Contents



A. Operating results.
  (Amounts in thousands of Rmb)2007
    
    2008
    
    2009Amount
    
    Amount
    
    AmountRevenues
    
    
    
    
    
    
    10
    
    
    
    Cost of sales
    
    
    
    
    
    
    (20
    )
    
    
    Gross loss
    
    
    
    
    
    
    (10
    )
    
    
    Research and development expenses
    
    
    
    
    
    
    (133
    )
    
    
    (552
    )General and administrative expenses
    
    
    (24,495
    )
    
    
    (24,195
    )
    
    
    (24,970
    )Impairment on property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    (6,463
    )Impairment on inventories
    
    
    
    
    
    
    
    
    
    
    (346
    )Operating loss
    
    
    (24,495
    )
    
    
    (24,338
    )
    
    
    (32,331
    )Other income (expense):Interest income
    
    
    827
    
    
    
    79
    
    
    
    7Finance costs
    
    
    
    
    
    
    (475
    )
    
    
    (5,799
    )Gain (loss) on disposal of
available-for-sale securities
    
    
    15,405
    
    
    
    (14,049
    )
    
    
    111Impairment on available-for-sale securities
    
    
    
    
    
    
    (15,213
    )
    
    
    Impairment on other investments
    
    
    
    
    
    
    
    
    
    
    (571
    )Dividend income from available-for-sale
securities
    
    
    58
    
    
    
    48
    
    
    
    71Change in fair value of derivative embedded
in convertible note
    
    
    
    
    
    
    
    
    
    
    (5,040
    )Change in fair value of warrants and
option rights
    
    
    
    
    
    
    (1,236
    )
    
    
    3,798Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    (3,434
    )Subsidies from government
    
    
    
    
    
    
    
    
    
    
    600Exchange loss
    
    
    (482
    )
    
    
    (268
    )
    
    
    (218
    )Others, net
    
    
    (7
    )
    
    
    (36
    )
    
    
    (2
    )Income tax (expenses) credit
    
    
    (390
    )
    
    
    712
    
    
    
    112Loss from continuing operations
    
    
    (9,084
    )
    
    
    (54,776
    )
    
    
    (42,696
    )Profit from discontinued operations
    
    
    1,973
    
    
    
    858
    
    
    
    4,227Net loss for the year
    
    
    (7,111
    )
    
    
    (53,918
    )
    
    
    (38,469
    )
  29




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##### Table of Contents



Comparison of Years ended December 31, 2009, 2008 and 2007
 Revenues.
 Cost of sales.
 Gross profit (loss).
 Research and development expenses
 General and administrative expenses.
 
    
    a Rmb1.58 million, or 14.0%, increase in salaries and benefits expenses resulting from
an increase in stock-based compensation recognized;
    
    a Rmb0.48 million, or 22.8%, increase in depreciation expenses resulting from the
purchase of additional property, plant and equipment, as well as the expansion of our
Solar Energy Operations; and
    
    a Rmb0.21 million, or 12.9%, increase in audit fees resulting from an increase in fees
of our current auditor as well as an increase in fees of our former auditors in connection
with the issuance of a consent;
  
    
    a Rmb0.73 million, or 20.3%, decrease in legal and other professional fees resulting
from a decrease in corporate and securities matters and transactions and the enhancement
of internal personnel for corporate governance, compliance and legal matters;
    
    a Rmb0.31 million, or 31.7%, decrease in rental expenses resulting from our move to a
smaller office;
    
    a Rmb0.11 million, or 25.2%, decrease in consultant fees resulting from a decrease in
our use of external consultants for business development;
    
    a Rmb0.18 million, or 46.4%, decrease in office supplies expenses resulting from
strengthened control over costs and expenses; and
 30




---



##### Table of Contents




    
    a Rmb0.13 million, or 30.4%, decrease in insurance expenses resulting from a change of
insurance carriers in 2009 in respect of major insurance policies.
  
    
    a Rmb7.05 million, or 62.5%, decrease in legal and other professional fees resulting
from a decrease in corporate and securities matters and transactions, enhancement of
internal personnel for corporate governance, compliance and legal matters and a change of
legal service providers;
    
    a Rmb1.58 million, or 49.4%, decrease in audit fees resulting from a decrease in fees
of our current auditor and a decrease in the number of accounting firms required to issue
auditing consent; and
    
    a Rmb0.56 million, or 35.9%, decrease in travel and entertainment expenses resulting
from strengthened control over costs and expenses for employees in 2008 and recruiting
more local staff in our Solar Energy Operations;
  
    
    a RMB7.06 million, or 136%, increase in salaries and benefits expenses resulting from
Rmb6.20 million of additional stock-based compensation expense and an increase in
headcount related to the expansion of our Solar Energy Operations;
    
    a Rmb1.66 million, or 361%, increase in depreciation expense resulting from the
purchase of additional property, plant and equipment; and
    
    a Rmb0.01 million, or 1.03%, increase in rental expenses.
 Impairment on property, plant and equipment and inventories.
 Other income (expense)
 Profit from discontinued operations.
 Net loss.
 31




---



##### Table of Contents



Taxation
      B. Liquidity and capital resources
 Working capital and cash flows
  32




---



##### Table of Contents



For the years ended December 31,2007
    
    
    2008
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb(thousands)Net cash used in operating activities
    
    
    (17,499
    )
    
    
    (15,131
    )
    
    
    (17,268
    )Net cash used in investing activities
    
    
    (1,943
    )
    
    
    (13,953
    )
    
    
    (35,791
    )Net cash generated from financing activities
    
    
    37,190
    
    
    
    18,676
    
    
    
    70,929Effect of exchange rate changes on cash
    
    
    (2,317
    )
    
    
    (668
    )
    
    
    (29
    )Net increase (decrease) in cash and cash equivalents
    
    
    15,431
    
    
    
    (11,076
    )
    
    
    17,841Cash and cash equivalents at beginning of year
    
    
    3,475
    
    
    
    18,906
    
    
    
    6,770Less: cash and cash equivalents at end of year from
discontinued operations
    
    
    
    
    
    
    (1,060
    )
    
    
    Cash and cash equivalents at end of year
    
    
    18,906
    
    
    
    6,770
    
    
    
    24,611
  Operating activities
   Investing activities
   Financing activities
   33




---



##### Table of Contents



Restricted net assets
  Capital resources
     C. Research and development, patents and licenses, etc.
  D. Trend information.
 34




---



##### Table of Contents



E. Off-balance sheet arrangements.
  F. Tabular disclosure of contractual obligations.
  (Amounts in thousands)RmbAs of December 31,2010
    
    
    7862011
    
    
    2532012
    
    
    1562013
    
    
    46Total
    
    
    1,241
  Commitments
 Capital commitments for construction in progress
  ®
 G. Safe harbor.
 Forward-Looking Statement Disclosure
 35




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 A. Directors and senior management.
  Name
    
    Age
    
    Positions with the CompanyAlan Li
    
    
    42
    
    
    Chairman of the Board, Executive Director and
Chief Executive OfficerZhenwei Lu
    
    
    39
    
    
    Executive Director and Chief Operating OfficerTairan Guo
    
    
    32
    
    
    Executive Director and Chief Business
Development Officer, Acting Chief Financial
OfficerJu Zhang
    
    
    47
    
    
    Executive DirectorLoong Cheong Chang (1) (3)
    
    
    64
    
    
    Independent DirectorXiaoping Wang
    
    
    50
    
    
    Independent DirectorXinping Shi (2) (3)
    
    
    51
    
    
    Independent DirectorWeidong Wang (2) (3)
    
    
    43
    
    
    Independent DirectorYu Keung Poon (1) (2)
    
    
    45
    
    
    Independent DirectorYezhong Ni (1)
    
    
    40
    
    
    Independent Director
 
 (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Nominating Committee Mr. Alan Li
 36




---



##### Table of Contents



Mr. Zhenwei Lu
 Mr. Tairan Guo
 Mr. Ju Zhang
 Mr. Loong Cheong Chang
 Mr. Xiaoping Wang
 Dr. Xinping Shi
 37




---



##### Table of Contents



Mr. Weidong Wang
 Mr. Yu Keung Poon
 Mr. Yezhong Ni
  B. Compensation.
    38




---



##### Table of Contents



Number
    
    ExerciseOf
    
    PriceName
    
    Title/Office
    
    options
    
    Per option
    
    Expiration Date(US$)Alan Li
    
    Chairman, Executive Director and Chief Executive Officer
    
    
    150,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)23,000
    
    
    
    2.12
    
    
    October 1, 2019 (2)30,000
    
    
    
    2.12
    
    
    October 1, 2019 (3)223,000
    
    
    
    2.12
    
    
    October 1, 2014 (4)Zhenwei Lu
    
    Executive Director and Chief Operating Officer
    
    
    80,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)Tairan Guo
    
    Executive Director, Chief Business Development Officer and Vice President
    
    
    50,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)Xinping Shi
    
    Independent Director
    
    
    40,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)Yezhong Ni
    
    Independent Director
    
    
    30,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)Weidong Wang
    
    Independent Director
    
    
    30,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)Loong Cheong Chang
    
    Independent Director
    
    
    60,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)Yu Keung Poon
    
    Independent Director
    
    
    30,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)Xiaoping Wang
    
    Independent Director
    
    
    10,000
    
    
    
    2.12
    
    
    October 1, 2014 (1)
 
 Notes:(1)
    
    These options were granted under our 2009 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on October 1, 2009. One-third of the options vest on October 1, 2010,
one-third of the options vest on October 1, 2011, and the remaining one-third of the options vest
on October 1, 2012.(2)
    
    These options were granted under our 2000 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on October 1, 2009. All of the options vested immediately upon grant.(3)
    
    These options were granted under our 2005 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on October 1, 2009. All of the options vested immediately upon grant.(4)
    
    These options were granted under our 2006 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on October 1, 2009. One-third of the options vest on October 1, 2010
and the remaining two-third of the options vest on October 1, 2011.  C. Board practices.
 39




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##### Table of Contents



Board committees
  Audit Committee
   Compensation Committee
 Nominating Committee.
  Term of directors and executive officers
  40




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##### Table of Contents



D. Employees.
  2009
    
    2008
    
    2007Corporate administration
    
    
    14
    
    
    
    16
    
    
    
    18Finance and accounting
    
    
    7
    
    
    
    9
    
    
    
    10Research and development
    
    
    0
    
    
    
    0
    
    
    
    3Technology and engineering
    
    
    9
    
    
    
    6
    
    
    
    8Sales and services
    
    
    0
    
    
    
    4
    
    
    
    6Manufacturing
    
    
    5
    
    
    
    34
    
    
    
    3Total
    
    
    35
    
    
    
    69
    
    
    
    48
   E. Share ownership.
  NumberOf
    
    Exercise 
PriceName
    
    Title/Office
    
    options
    
    Per option
    
    Expiration Date(US$)Alan Li
    
    Chairman, Executive Director and Chief Executive Officer
    
    
    75,000
    
    
    
    1.85
    
    
    September 20, 2015 (1)100,000
    
    
    
    3.18
    
    
    September 18, 2016 (2)150,000
    
    
    
    3.13
    
    
    May 23, 2012 (3)100,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)120,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)53,000
    
    
    
    2.12
    
    
    October 1, 2019 (6)
 41




---



##### Table of Contents



Number
Of
    
    Exercise 
PriceName
    
    Title/Office
    
    options
    
    Per option
    
    Expiration Date(US$)Zhenwei Lu
    
    Executive Director and Chief Operating Officer
    
    
    40,000
    
    
    
    1.85
    
    
    September 20, 2015 (1)60,000
    
    
    
    3.18
    
    
    September 18, 2016 (2)80,000
    
    
    
    3.13
    
    
    May 23, 2012(3)80,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)80,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)Ju Zhang
    
    Executive Director
    
    
    10,000
    
    
    
    1.85
    
    
    September 20, 2015 (1)10,000
    
    
    
    3.18
    
    
    September 18, 2016 (2)10,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)10,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)Tairan Guo
    
    Executive Director, Chief Business Development Officer and Vice President
    
    
    20,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)40,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)Xinping Shi
    
    Independent Director
    
    
    10,000
    
    
    
    3.18
    
    
    September 18, 2016 (2)30,000
    
    
    
    3.13
    
    
    May 23, 2012 (3)22,800
    
    
    
    2.04
    
    
    November 10, 2013 (4)50,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)Yezhong Ni
    
    Independent Director
    
    
    10,000
    
    
    
    1.85
    
    
    September 20, 2015 (1)10,000
    
    
    
    3.18
    
    
    September 18, 2016 (2)10,000
    
    
    
    3.13
    
    
    May 23, 2012 (3)20,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)40,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)Weidong Wang
    
    Independent Director
    
    
    10,000
    
    
    
    1.85
    
    
    September 20, 2015 (1)10,000
    
    
    
    3.18
    
    
    September 18, 2016 (2)10,000
    
    
    
    3.13
    
    
    May 23, 2012(3)20,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)40,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)Loong Cheong Chang
    
    Independent Director
    
    
    30,000
    
    
    
    3.13
    
    
    May 23, 2012 (3)30,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)50,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)Yu Keung Poon
    
    Independent Director
    
    
    20,000
    
    
    
    3.13
    
    
    May 23, 2012 (3)20,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)40,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)
 42




---



##### Table of Contents



Number
Of
    
    Exercise 
PriceName
    
    Title/Office
    
    options
    
    Per option
    
    Expiration Date(US$)Xiaoping Wang
    
    Independent Director
    
    
    10,000
    
    
    
    3.13
    
    
    May 23, 2012 (3)10,000
    
    
    
    2.04
    
    
    November 10, 2013 (4)10,000
    
    
    
    1.79
    
    
    December 30, 2013 (5)
 
 Note:(1)
    
    These options were granted under our 1996 Stock Option Plan and 2000 Stock Option Plan
pursuant to a board resolution passed on September 20, 2005 and are fully vested.(2)
    
    These options were granted under our 2005 Stock Option Plan pursuant to a board resolution
passed on September 18, 2006 and are fully vested.(3)
    
    These options were granted under our 2006 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on May 23, 2007 and are fully vested.(4)
    
    These options were granted under our 2007 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on November 10, 2008. One-third of such options vested on
November 10, 2009, one-third vest on November 10, 2010 and the remaining one-third vest on
November 10, 2011.(5)
    
    These options were granted under our 2008 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on December 30, 2008. One-third of such options vested on
December 30, 2009, one-third vest on December 30, 2010 and the remaining one-third vest on
December 30, 2011.(6)
    
    These options were granted under our 2000 Stock Option Plan and 2005 Stock Option Plan
pursuant to a resolution of the Compensation Committee passed on October 1, 2009 and are fully
vested. Stock Option Plans
  Stock Option Plan
    
    Date of Shareholder Approval1996 Stock Option Plan, or the 1996 Plan
    
    October 10, 19962000 Stock Option Plan, or the 2000 Plan
    
    September 5, 20002005 Stock Option Plan, or the 2005 Plan
    
    October 20, 20052006 Stock Option Plan, or the 2006 Plan
    
    December 22, 20062007 Stock Option Plan, or the 2007 Plan
    
    October 19, 20072008 Stock Option Plan, or the 2008 Plan
    
    December 12, 20082009 Stock Option Plan, or the 2009 Plan
    
    September 11, 2009
 43




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##### Table of Contents



1996 Plan
  2000 Plan
  2005 Plan
  2006 Plan
  2007 Plan
  2008 Plan
  2009 Plan
  
 Item 7. Major Shareholders and Related Party Transactions
 A. Major shareholders.
  44




---



##### Table of Contents



Shares of common stock
    
    Percent ofPrincipal Shareholder
    
    beneficially owned (1)
    
    classChina Biotech Holdings Limited
5/F, B&H Plaza, 27 Industry Ave
Shekou, Shenzhen 518067
PR China
    
    
    4,132,168
    
    
    
    19.35
    %CMTF Private Equity One
48/F, One Exchange Square, Central,
Hong Kong SAR, China
    
    
    3,322,260
    
    
    
    15.55
    %China Wanhe Investment Limited
Suite 2616, Jardine House,
1 Connaught Place, Central,
Hong Kong SAR, China
    
    
    2,000,000
    
    
    
    9.36
    %Alan Li (2)
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Zhenwei Lu (2) 
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Ju Zhang (2)
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Tairan Guo
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Loong Cheong Chang

c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre,
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Xiaoping Wang
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Xinping Shi
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Yezhong Ni
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Weidong Wang 
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *Yu Keung Poon
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 
168-200 Connaught Road Central 
Hong Kong
    
    
    0
    
    
    
    *All officers and directors as a group (10 persons) (2)
    
    
    0
    
    
    
    *
 45




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##### Table of Contents



*
    
    less than 1%.(1)
    
    Unless otherwise noted, all persons named have sole voting and investment power with respect
to all shares of common stock beneficially owned by them, excluding any stock options. For
details of stock options granted to the directors and officers please refer to Item 6.E Share
ownership.(2)
    
    Mr. Alan Li, Chairman of the Board, Executive Director and Chief Executive Officer, Mr.
Zhenwei Lu, Executive Director and Chief Operating Officer and Mr. Ju Zhang, Executive
Director, are also directors of China Biotech and therefore may be deemed to beneficially own
the shares of common stock owned by China Biotech.  
    
    Voting rights.The 1,000,000 shares of Series A Preferred Stock have an aggregate
voting power equal to 25% of the combined voting power of our common stock and
preferred stock.
 
    
    Dividends.Holders of Series A Preferred Stock are entitled to receive dividends
only as, when and if such dividends are declared by the Board of Directors.
 
    
    Liquidation preference.In the event of any distribution of assets upon any
liquidation, dissolution or winding up of our company, whether voluntary or
involuntary, after payment or provision for payments of our debts and other
liabilities, holders of Series A Preferred Stock are entitled to receive out of our
assets an amount equal to the consideration paid by them for each such share plus any
accrued and unpaid dividends with respect to such shares of Series A Preferred Stock
through the date of such liquidation, dissolution or winding up.
    
    Redemption.The Series A Preferred Stock is not redeemable.
    
    Convertible.The Series A Preferred Stock is not convertible.
  B. Related party transactions.
  Amounts in thousandsRmbTransactions with related partiesLoan from Alan Li (1)
    
    
    792Repayment overdraft of security account China Biotech (2)
    
    
    440US$10 million convertible note issued by CGHL to CMTF Private Equity
One (3)
    
    
    68,672Deposit
payment to China Biotech for acquisition of production line (4)
    
    
    6,867
 
 (1)
    
    In February 2009, BHLHK, a wholly owned subsidiary of our company, entered into a loan
agreement with Mr. Alan Li to borrow HK$0.90 million for 10 months without interest. Mr. Alan
Li is one of the directors of BHLHK and is our Chairman of the Board of Directors, Executive
Director and Chief Executive Officer. The loan is for its working capital purposes and was
repaid in full in May 2009.(2)
    
    Represents repayment of overdraft of securities account on behalf of BHLHK by China Biotech
in February 2009. 46




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##### Table of Contents



(3)
    
    In April 2009, we and two of our subsidiaries, China Green Industry Group Ltd. and China
Green Holdings Ltd., or CGHL, entered into a subscription agreement with CMTF Private Equity
One. Pursuant to the subscription agreement, CGHL issued to CMTF Private Equity One a
convertible note in a principal amount of US$10.0 million with three-year maturity and an
interest rate equal to the Hong Kong Prime Rate. The Convertible Note was, at the holders
option, either convertible into the outstanding ordinary shares of CGHL or exchangeable for
shares of our common stock. In November 2009, CMTF Private Equity One exchanged the
convertible note for 3,322,260 shares of our common stock. CMTF Private Equity One is one of
the funds managed by CMS Capital (HK) Co., Ltd. (formerly known as CMTF Asset Management
Limited). China Merchants Securities Investment Ltd, one of subsidiaries of China Merchants
Group, holds 100% of equity interest of CMS Capital (HK) Co., Ltd..(4)
    
    In December 2009, we entered into an Agency Contract regarding the purchase of one a-Si thin
film solar panel production line with China Biotech. Pursuant to the Agency Contract, we
appointed China Biotech as our representative to liaise and negotiate with an equipment
supplier to purchase one a-Si thin film solar panel production line, together with a license
for patents, proprietary technology, technical service and training. We paid USD1.0 million to
China Biotech as a deposit for the purchase. On May 13, 2010, we amended the Agency Contract
to extend the delivery date for three additional months. On June 22, 2010, we terminated the
Agency Contract, as amended, with China Biotech and the deposit was refunded in full to us
upon termination.  Amounts inthousandsRmbBalances with related parties:Due from related partiesFunds held by China Biotech for potential
acquisition of technology and business in
China (4 and 5)
    
    
    12,05312,053Due to related parties:Due to China Biotech (6)
    
    
    859Due to CMZDZ (7)
    
    
    8,0858,944
 
 (5)
    
    China Biotech has been the largest shareholder of our company since January 12, 2007. In view
of China Biotechs experience with acquisitions in China, we deposited HK$6 million with China
Biotech for the purpose of making (with the assistance of China Biotech) potential
acquisitions of technology and businesses in China. There is no agreement between our company
and China Biotech for the deposited funds and we can withdraw the funds without restriction at
any time.(6)
    
    Represents administrative expenses paid on behalf of Faster and Shenzhen Helios Energy by
China Biotech in China.(7)
    
    Prior to the acquisition (see Note 3 to the consolidated financial statements), Faster Group
had no business activities and its major asset was a right to purchase a real estate located
in the Tangyang Industrial Zone of China Merchants Zhangzhou Development Zone, from China
Merchants Zhangzhou Development Zone Ltd.,
or CMZDZ, for a consideration of Rmb13,085, of which Rmb5,783 was borne by the Faster Group and
Rmb7,302 was committed to be settled by China Biotech. In 2008, the Group received Rmb7,302
from China Biotech and paid Rmb5,000 to CMZDZ. The remaining balance due to CMZDZ is Rmb8,085.  C. Interests of experts and counsel.
  
 Item 8. Financial Information
 A. Consolidated Statements and Other Financial Information.
 47




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##### Table of Contents



B. Significant Changes.
  
 Item 9. The Offer and Listing.
 A. Offer and listing details.
   Nasdaq Capital Market
    US$(Year Ended)
    
    High
    
    LowDecember 31, 2009
    
    
    4.78
    
    
    
    1.36December 31, 2008
    
    
    9.45
    
    
    
    1.19December 31, 2007
    
    
    10.39
    
    
    
    2.71December 31, 2006
    
    
    12.15
    
    
    
    1.34December 31, 2005
    
    
    8.80
    
    
    
    1.53
  Nasdaq Capital Market
    
    US$(Quarter Ended)
    
    High
    
    LowMarch 31, 2010
    
    
    3.08
    
    
    
    2.46December 31, 2009
    
    
    4.78
    
    
    
    2.12September 30, 2009
    
    
    2.89
    
    
    
    1.98June 30, 2009
    
    
    3.25
    
    
    
    2.16March 31, 2009
    
    
    3.54
    
    
    
    1.36December 31, 2008
    
    
    3.06
    
    
    
    1.19
 48




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##### Table of Contents



Nasdaq Capital Market
    
    US$(Quarter Ended)
    
    High
    
    LowSeptember 30, 2008
    
    
    4.83
    
    
    
    3.10June 30, 2008
    
    
    7.20
    
    
    
    4.29March 31, 2008
    
    
    9.45
    
    
    
    3.14
  Nasdaq Capital Market
    
    US$(Month Ended)
    
    High
    
    LowMay 31, 2010
    
    
    3.22
    
    
    
    2.64April 30, 2010
    
    
    3.83
    
    
    
    2.93March 31, 2010
    
    
    3.02
    
    
    
    2.46February 28, 2010
    
    
    2.83
    
    
    
    2.55January 31, 2010
    
    
    3.08
    
    
    
    2.62December 31, 2009
    
    
    3.73
    
    
    
    2.62
 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.
 49




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##### Table of Contents



Objects and Powers
  Directors
     Share Rights, Preferences and Restrictions
  Rights, preferences and restrictions attaching to common stock
   Rights, preferences and restrictions attaching to Series A Preferred Stock
      50




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Changing Share Rights
  Shareholder Meetings
     Restrictions on Rights to Own Securities
  Change in Control Provisions
  Disclosure of Share Ownership
  Applicable Law
     51




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Changes in Capital
  Nasdaq Requirements
   
    
    our independent directors do not hold regularly scheduled meetings in executive
session;
    
    the compensation of our executive officers is not determined by an independent
committee of the board or by the independent members of the board of directors, and our
CEO may be present and participate in the deliberations concerning his compensation;
    
    related party transactions are not required to be reviewed or approved by our audit
committee or other independent body of the board of directors; and
    
    we are not required to solicit shareholder approval of stock plans, including those in
which our officers or directors may participate; stock issuances that will result in a
change in control; the issuance of our stock in related party transactions or other
transactions in which we may issue 20% or more of our outstanding shares; or, below market
issuances of 20% or more of our outstanding shares to any person.
  C. Material contracts.
   52




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53




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D . Exchange controls.
    E. Taxation.
  British Virgin Islands Taxation
  54




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##### Table of Contents



United States Federal Income Taxation
   
    
    certain financial institutions;
    
    insurance companies;
    
    brokers or dealers;
    
    U.S. expatriates;
    
    traders that elect to mark-to-market;
    
    tax-exempt entities;
    
    persons liable for alternative minimum tax;
    
    persons holding our common stock as part of a straddle, hedging, conversion or
integrated transaction;
    
    persons whose functional currency is not the U.S. dollar;
    
    persons that actually or constructively own 10% or more of our voting stock; or
    
    persons holding common shares through partnerships or other entities treated as
partnerships for U.S. federal income tax purposes.
   
    
    a citizen or resident of the United States, including an alien individual who is a
lawful permanent resident of the United States or who meets the substantial presence
residency test under U.S. federal income tax laws;
    
    a corporation (or other entity taxable as a corporation for U.S. federal income tax
purposes) organized under the laws of the United States, any state in the United States
or the District of Columbia, unless otherwise provided by Treasury Regulations;
    
    an estate whose income is subject to U.S. Federal income taxation regardless of its
source; or
    
    a trust that (1) is subject to the primary supervision of a court within the United
States and one or more U.S. persons have the authority to control all substantial
decisions of the trust or (2) was in existence on August 20, 1996, was treated as a U.S.
person under the Internal Revenue Code on the previous day and has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
  55




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Taxation of Dividends and Other Distributions on our Common Stock
    Sale, Exchange or Other Disposition of Common Stock
  Passive Foreign Investment Company
   
    
    at least 75% of its gross income is passive income (the income test) ; or
    
    at least 50% of the value of its assets (based on an average of the
quarterly values of the assets during a taxable year) is attributable to
assets that produce or are held for the production of passive income (the
asset test).
  56




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##### Table of Contents




    
    the excess distribution or gain will be allocated ratably over
your holding period for our common stock
    
    the amount allocated to the current taxable year, and any taxable
year prior to the first taxable year in which we became a PFIC,
will be treated as ordinary income;
    
    the amount allocated to each other taxable year will be subject to
the highest tax rate in effect for that taxable year and interest
charge generally applicable to underpayments of tax will be
imposed on the resulting tax attributable to each such taxable
year; and
    
    the total gain realized by you upon the sale or other disposition
of the common stock will also be considered an excess distribution
and will be subject to tax as described above.
   de minimis
     57




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##### Table of Contents



Information Reporting and Backup Withholding
   F. Dividends and paying agents.
  G. Statement by experts.
  H. Documents on display.
 www.sec.gov
  I . Subsidiary Information.
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk.
 Foreign exchange risk
  58




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Interest rate risk
  Inflation
  
 Item 12. Description of Securities Other than Equity Securities.
  59




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##### Table of Contents



PART II
 
 Item 13. Default, Dividend Arrearages and Delinquencies.
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
  
 Item 15T. Controls and Procedures.
 Disclosure Controls and Procedures
   Managements Report on Internal Control over Financial Reporting
  
    
    Pertain to the maintenance of records that, in reasonable details,
accurately and fairly reflect the transactions and dispositions of
an issuers assets;
    
    Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that an issuers receipts and
expenditures are being made only in accordance with authorizations
of its management and directors; and
    
    Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of an
issuers assets that could have a material effect on the financial
statements.
   60




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##### Table of Contents



(1)
    
    lack of internal audit department to perform the internal auditing function over financial
reporting in our company; and(2)
    
    lack of accounting personnel with knowledge of U.S. GAAP and SEC financial reporting
requirements.
  Changes in internal control over financial reporting
  (1)
    
    establishment of additional communications to receive internal and external
information relating to fraud prevention,(2)
    
    establishment of more detailed policies and procedures relating to fraud prevention in
our employee code of conduct,(3)
    
    training our existing accounting personnel on U.S. GAAP and other financial reporting
requirements promulgated by the SEC.
  
 Item 16A. Audit Committee Financial Expert.
  
 Item 16B. Code of Ethics.
 61




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##### Table of Contents



www.chinactdc.com.
 
 Item 16C. Principal Accountant Fees and Services.
 Audit Fees
  Audit-Related Fees
  
    
    Rmb0.27 million to issue a consent for inclusion of their audit reports for the fiscal
years ended December 31, 2007 and 2008 in our 2009 Annual Report;
    
    Rmb0.05 million to prepare for a consent to include their audit report for the fiscal
years ended December 31, 2007 and 2008 in our registration statement on Form F-3; and
    
    Rmb0.03 million to issue a consent for inclusion of their audit report for the fiscal
years ended December 31, 2007 and 2008 in our registration statement on Form S-8.
  Tax Fees
  Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
  Audit of Financial Statements
  62




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##### Table of Contents



Item 16D. Exemptions from the Listing Standards for Audit Committee.
  
 Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers.
  
 Item 16F. Change in Registrants Certifying Accountant.
       
 Item 16G. Corporate Governance.
   
    
    Nasdaq Rule 5605(b)(2) requires U.S. domestic issuers to hold regularly scheduled meetings at
which only independent directors are present. Our independent directors did not meet in executive
session in 2009.
    
    Nasdaq Rule 5605(d) requires that compensation of executive officers must be determined, or
recommended to the board of directors for determination, either by committee comprised solely of
independent directors or by a
 63




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##### Table of Contents




    
    Nasdaq Rule 5630 requires related party transactions to be reviewed and overseen on an ongoing
basis by the companys audit committee or other independent body of the board of directors.
    
    In addition, we are not required to solicit shareholder approval of the following: stock plans,
including those in which our officers or directors may participate; stock issuances that will
result in a change in control; the issuance of our stock in related party transactions or other
transactions in which we may issue 20% or more of our outstanding shares; and below market
issuances of 20% or more of our outstanding shares to any person (Nasdaq Rule 5635).
  
 Item 17. Financial Statements.
  
 Item 18. Financial Statements.
  64




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##### Table of Contents



Item 19. Exhibits.
  ExhibitNumber
    
    Description of Document1.1
    
    Amended and Restated Memorandum and Articles of Association of China Technology Development
Group Corporation, adopted on October 19, 2007 (1)2.1
    
    Registration Rights Agreement, dated as of May 12, 2009, with CMTF Private Equity One (5)4.1
    
    Securities Purchase Agreement with institutional investors dated September 23, 2008. (3)4.2
    
    Sale and Purchase Agreement with Sentron Enterprises Limited dated December 29, 2008. (4)4.3
    
    Subscription Agreement with CMTF Private Equity One dated April 28, 2009. (5)4.4
    
    Stock Purchase Agreement with CTSPHL Group and its shareholders, dated as of October 27, 2009
(6)4.5
    
    Translation of agreement with China Biotech Holdings Limited dated as of December 15, 20094.6
    
    Subscription Agreement with China Wanhe Investment Limited dated as of April 28, 2010 (7)4.7
    
    Cooperation Framework Agreement with Xintang Media Technology (Beijing) Ltd. dated as of
April 28, 2010 (7)8.1
    
    List of all subsidiaries11.1
    
    Code of Ethics (2)12.1
    
    Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 200212.2
    
    Certification of Acting Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 200213.1
    
    Certification of Chief Executive Officer and Acting Chief Financial Officer required by
Section 906 of the Sarbanes-Oxley Act of 200216.1
    
    Letter of Deloitte Touche Tohmatsu CPA Ltd. regarding change in certifying accountant
dated June 30, 201023.1
    
    Consent of Deloitte Touche Tohmatsu CPA Ltd. to the incorporation by reference in the
Registration Statements on Form S-8 (file numbers 333-160837, 333-147806, 333-139608 and
333-127423) of their report dated June 26, 2009 included in our Annual Report on Form 20-F for the
fiscal year ended December 31, 200923.2
    
    Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company to the incorporation by
reference in the Registration Statements on Form S-8 (file numbers 333-160837, 333-147806,
333-139608 and 333-127423) of their report dated June 30, 2010 included in our Annual Report on
Form 20-F for the fiscal year ended December 31, 2009
 
 Notes:(1)
    
    incorporated by reference to the exhibits to our annual report on Form 20-F for the fiscal year ended December 31, 2007.(2)
    
    incorporated by reference to the exhibits to our annual report on Form 20-F for the fiscal year ended December 31, 2006.(3)
    
    incorporated by reference to the exhibits to our Report on Form 6-K filed with the SEC on
September 24, 2008.(4)
    
    incorporated by reference to the exhibits to our Report on Form 6-K filed with the SEC on
December 30, 2008.(5)
    
    incorporated by reference to the exhibits to our Report on Form 6-K filed with the SEC dated
May 4, 2009.(6)
    
    incorporated by reference to the exhibits to our Report on Form 6-K filed with the SEC dated
October 27, 2009.(7)
    
    incorporated by reference to the exhibits to our Report on Form 6-K filed with the SEC dated
April 29, 2010. 65




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##### Table of Contents



SIGNATURES
  CHINA TECHNOLOGY DEVELOPMENT
GROUP CORPORATIONDate: June 30, 2010
    /s/ Tairan GuoName:
    Tairan GuoTitle:
    Acting Chief Financial Officer 66




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm as of December 31, 2009 and for the year then ended
    
    F  2Report of Independent Registered Public Accounting Firm as of December 31, 2008 and for the years ended December 31, 2007 and 2008
    
    F  3Consolidated Statements of Operations for the years ended December 31, 2007, 2008 and 2009
    
    F  4Consolidated Balance Sheets as of December 31, 2008 and 2009
    
    F  5Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2007, 2008 and 2009
    
    F  6Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2008 and 2009
    
    F  8Notes to the Consolidated Financial Statements
    
    F  10




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  
 F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 F-3




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts expressed in thousands except per share data)
For the years ended December 31, 2007, 2008 and 2009
 Notes
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$ (Note 2 (g))Continuing operations:Revenues
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    Cost of sales
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    Gross loss
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    Research and development expenses
    
    
    
    
    
    
    
    
    
    
    (133
    )
    
    
    (552
    )
    
    
    (81
    )General and administrative expenses*
    
    
    
    
    
    
    (24,495
    )
    
    
    (24,195
    )
    
    
    (24,970
    )
    
    
    (3,657
    )Impairment on property, plant and equipment
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    (6,463
    )
    
    
    (947
    )Impairment on inventories
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (346
    )
    
    
    (51
    )Operating loss
    
    
    
    
    
    
    (24,495
    )
    
    
    (24,338
    )
    
    
    (32,331
    )
    
    
    (4,736
    )Other income (expense):Interest income
    
    
    
    
    
    
    827
    
    
    
    79
    
    
    
    7
    
    
    
    1Finance costs
    
    
    
    
    
    
    
    
    
    
    (475
    )
    
    
    (5,799
    )
    
    
    (849
    )Gain (loss) on disposal of available-for-sale securities
    
    
    
    
    
    
    15,405
    
    
    
    (14,049
    )
    
    
    111
    
    
    
    16Impairment on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    (15,213
    )
    
    
    
    
    
    
    Impairment on other investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (571
    )
    
    
    (84
    )Dividend income from available-for-sale securities
    
    
    
    
    
    
    58
    
    
    
    48
    
    
    
    71
    
    
    
    10Change in fair value of derivative embedded in convertible note
    
    
    11,20
    
    
    
    
    
    
    
    
    
    
    
    (5,040
    )
    
    
    (738
    )Change in fair value of warrants and option rights
    
    
    11,16
    
    
    
    
    
    
    
    (1,236
    )
    
    
    3,798
    
    
    
    556Loss on debt extinguishment
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    (3,434
    )
    
    
    (503
    )Subsidies from government
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    88Exchange loss
    
    
    
    
    
    
    (482
    )
    
    
    (268
    )
    
    
    (218
    )
    
    
    (32
    )Others, net
    
    
    
    
    
    
    (7
    )
    
    
    (36
    )
    
    
    (2
    )
    
    
    Loss before income tax expenses
    
    
    
    
    
    
    (8,694
    )
    
    
    (55,488
    )
    
    
    (42,808
    )
    
    
    (6,271
    )Income tax (expenses) credits
    
    
    4
    
    
    
    (390
    )
    
    
    712
    
    
    
    112
    
    
    
    16Loss from continuing operations
    
    
    
    
    
    
    (9,084
    )
    
    
    (54,776
    )
    
    
    (42,696
    )
    
    
    (6,255
    )Discontinued operations:
    
    
    5Profit from discontinued operations, net of income taxes (nil for 3
years) in the three years ended December 31, 2007, 2008 and 2009,
respectively
    
    
    
    
    
    
    1,973
    
    
    
    858
    
    
    
    4,227
    
    
    
    619Net loss for the year attributable to the shareholders of the Company
    
    
    
    
    
    
    (7,111
    )
    
    
    (53,918
    )
    
    
    (38,469
    )
    
    
    (5,636
    )Net loss per share
    
    
    13-Basic and diluted
    
    
    
    
    
    
    (0.50
    )
    
    
    (3.34
    )
    
    
    (2.42
    )
    
    
    (0.35
    )Net loss per share from continuing operations
    
    
    13-Basic and diluted
    
    
    
    
    
    
    (0.64
    )
    
    
    (3.39
    )
    
    
    (2.68
    )
    
    
    (0.39
    )Net earnings per share from discontinued operations
    
    
    13-Basic and diluted
    
    
    
    
    
    
    0.14
    
    
    
    0.05
    
    
    
    0.26
    
    
    
    0.04Weighted average common shares
    
    
    13-Basic and diluted
    
    
    
    
    
    
    14,249
    
    
    
    16,160
    
    
    
    15,927
    
    
    
    15,927
 
 *
    
    Included in general and administrative expenses are stock-based compensation of Rmb5,788,
Rmb8,738 and Rmb8,706 for the years ended December 31, 2007, 2008 and 2009, respectively.  F-4




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts expressed in thousands except share and per share data)
As of December 31, 2008 and 2009
 Notes
    
    
    2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    US$ (Note 2 (g))ASSETSCURRENT ASSETSCash and cash equivalents
    
    
    
    
    
    
    6,770
    
    
    
    24,611
    
    
    
    3,605Other investments
    
    
    
    
    
    
    
    
    
    
    336
    
    
    
    49Trading securities
    
    
    11
    
    
    
    
    
    
    
    3,825
    
    
    
    560Available-for-sale securities
    
    
    11,18
    
    
    
    4,712
    
    
    
    27,432
    
    
    
    4,018Trade accounts receivable, net of allowance for
doubtful accounts of nil and nil as of December 31,
2008 and 2009, respectively
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    Inventories, net of impairment provision of nil and
Rmb346 as of December 31, 2008 and 2009, respectively)
    
    
    
    
    
    
    211
    
    
    
    292
    
    
    
    43Due from related parties
    
    
    14
    
    
    
    5,282
    
    
    
    12,053
    
    
    
    1,765Prepaid expenses and other current assets
    
    
    6
    
    
    
    941
    
    
    
    716
    
    
    
    105Assets classified as held for sale
    
    5(iii)
    
    
    2,439
    
    
    
    
    
    
    
    TOTAL CURRENT ASSETS
    
    
    
    
    
    
    20,363
    
    
    
    69,265
    
    
    
    10,145Prepayment for land use right
    
    
    7
    
    
    
    4,400
    
    
    
    4,310
    
    
    
    631Property, plant and equipment, net
    
    
    8
    
    
    
    33,331
    
    
    
    25,258
    
    
    
    3,700Other non-current asset
    
    
    19
    
    
    
    
    
    
    
    20,602
    
    
    
    3,018Prepayments for acquisition of property, plant and
machinery
    
    
    9
    
    
    
    4,525
    
    
    
    
    
    
    
    TOTAL ASSETS
    
    
    
    
    
    
    62,619
    
    
    
    119,435
    
    
    
    17,494LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESTrade accounts payable
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    Accrued professional fees
    
    
    
    
    
    
    3,215
    
    
    
    3,713
    
    
    
    544Due to related parties
    
    
    14
    
    
    
    8,944
    
    
    
    8,944
    
    
    
    1,310Overdraft from account maintained with a security broker
    
    
    21
    
    
    
    1,499
    
    
    
    
    
    
    
    Government subsidies
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    44Liabilities relating to warrants
    
    
    11
    
    
    
    2,289
    
    
    
    3,003
    
    
    
    440Other current liabilities and accrued expenses
    
    
    10
    
    
    
    661
    
    
    
    3,465
    
    
    
    508Liabilities classified as held for sale
    
    5(iii)
    
    
    1,360
    
    
    
    
    
    
    
    TOTAL CURRENT LIABILITIES
    
    
    
    
    
    
    17,971
    
    
    
    19,428
    
    
    
    2,846Deferred tax liabilities-non-current
    
    
    4
    
    
    
    2,418
    
    
    
    2,306
    
    
    
    338TOTAL LIABILITIES
    
    
    
    
    
    
    20,389
    
    
    
    21,734
    
    
    
    3,184Contingencies and commitments
    
    
    22SHAREHOLDERS EQUITYCommon stock, (US$0.01 par value; 4,000,000,000
authorized in 2008 and 2009; 15,543,669 and 19,300,390
shares issued and outstanding as of December 31, 2008
and 2009, respectively)
    
    
    16
    
    
    
    1,205
    
    
    
    1,463
    
    
    
    214Preferred stock, (US$0.01 par value; 1,000,000,000
shares authorized; 1,000,000 shares issued and
outstanding as of December 31, 2008 and 2009)
    
    
    17
    
    
    
    77
    
    
    
    77
    
    
    
    11Additional paid-in capital
    
    
    
    
    
    
    394,606
    
    
    
    482,329
    
    
    
    70,650Accumulated deficit
    
    
    
    
    
    
    (346,791
    )
    
    
    (384,299
    )
    
    
    (56,291
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    (6,867
    )
    
    
    (1,869
    )
    
    
    (274
    )TOTAL SHAREHOLDERS EQUITY
    
    
    
    
    
    
    42,230
    
    
    
    97,701
    
    
    
    14,310TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    
    
    
    
    62,619
    
    
    
    119,435
    
    
    
    17,494
  F-5




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2007, 2008 and 2009
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred stock
    
    
    Common stock
    
    
    paid in
    
    
    Accumulated
    
    
    comprehensive
    
    
    shareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    deficit
    
    
    (loss) income
    
    
    equityRmb
    
    
    
    
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbBalance at January 1, 2007
    
    
    
    
    
    
    
    
    
    
    13,809,497
    
    
    
    1,078
    
    
    
    335,692
    
    
    
    (285,762
    )
    
    
    (368
    )
    
    
    50,640Issue of shares
    
    
    1,000,000
    
    
    
    77
    
    
    
    782,168
    
    
    
    60
    
    
    
    20,563
    
    
    
    
    
    
    
    
    
    
    
    20,700Shares issued upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    437,000
    
    
    
    32
    
    
    
    7,736
    
    
    
    
    
    
    
    
    
    
    
    7,768Issue of warrants during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,584
    
    
    
    
    
    
    
    
    
    
    
    4,584Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,204
    
    
    
    
    
    
    
    
    
    
    
    1,204Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,111
    )
    
    
    
    
    
    
    (7,111
    )Net unrealized gain on
available-for-sale securities, net of Rmb1,325 tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,247
    
    
    
    6,247Reclassification adjustment upon disposal of
available-for-sale securities, net of tax provision of nil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84
    )
    
    
    (84
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,759
    )
    
    
    (3,759
    )Total comprehensive loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,707
    )Balance at December 31, 2007
    
    
    1,000,000
    
    
    
    77
    
    
    
    15,028,665
    
    
    
    1,170
    
    
    
    369,779
    
    
    
    (292,873
    )
    
    
    2,036
    
    
    
    80,189Issue of
common stock, warrants and options to investors (net of offering cost of Rmb682)
    
    
    
    
    
    
    
    
    
    
    498,338
    
    
    
    34
    
    
    
    7,809
    
    
    
    
    
    
    
    
    
    
    
    7,843Shares issued upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    16,666
    
    
    
    1
    
    
    
    357
    
    
    
    
    
    
    
    
    
    
    
    358Modification of warrants issued to non-employees in prior year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,364
    
    
    
    
    
    
    
    
    
    
    
    2,364Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,374
    
    
    
    
    
    
    
    
    
    
    
    6,374Contribution
by major shareholder - China Biotech
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,923
    
    
    
    
    
    
    
    
    
    
    
    7,923Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,918
    )
    
    
    
    
    
    
    (53,918
    )
 F-6




---



##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2007, 2008 and 2009
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred stock
    
    
    Common stock
    
    
    paid in
    
    
    Accumulated
    
    
    comprehensive
    
    
    shareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    deficit
    
    
    (loss) income
    
    
    equityRmb
    
    
    
    
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbReclassification adjustment upon disposal of
available-for-sale securities, net of tax provision of Rmb1,325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,247
    )
    
    
    (6,247
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,656
    )
    
    
    (2,656
    )Total comprehensive loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,821
    )Balance at December 31, 2008
    
    
    1,000,000
    
    
    
    77
    
    
    
    15,543,669
    
    
    
    1,205
    
    
    
    394,606
    
    
    
    (346,791
    )
    
    
    (6,867
    )
    
    
    42,230Effect of adoption of ASC 815-40-15 resulting from reclassification of warrants and option
rights (Note 16)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,488
    )
    
    
    961
    
    
    
    
    
    
    
    (7,527
    )Balance at 1 January 2009
    
    
    1,000,000
    
    
    
    77
    
    
    
    15,543,669
    
    
    
    1,205
    
    
    
    386,118
    
    
    
    (345,830
    )
    
    
    (6,867
    )
    
    
    34,703Issue of shares upon exercise of option rights
    
    
    
    
    
    
    
    
    
    
    60,000
    
    
    
    4
    
    
    
    1,121
    
    
    
    
    
    
    
    
    
    
    
    1,125Shares issued upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    136,864
    
    
    
    10
    
    
    
    2,580
    
    
    
    
    
    
    
    
    
    
    
    2,590Issue of shares upon conversion of convertible note
    
    
    
    
    
    
    
    
    
    
    3,322,260
    
    
    
    228
    
    
    
    80,764
    
    
    
    
    
    
    
    
    
    
    
    80,992Issue of shares upon exercise of stock purchase warrant
    
    
    
    
    
    
    
    
    
    
    14,776
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Issue of shares upon exercise of Warrant B
    
    
    
    
    
    
    
    
    
    
    222,821
    
    
    
    15
    
    
    
    3,041
    
    
    
    
    
    
    
    
    
    
    
    3,056Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,706
    
    
    
    
    
    
    
    
    
    
    
    8,706Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,469
    )
    
    
    
    
    
    
    (38,469
    )Net unrealized gain on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,228
    
    
    
    9,228Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,230
    )
    
    
    (4,230
    )Total comprehensive loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,471
    )Balance at December 31, 2009
    
    
    1,000,000
    
    
    
    77
    
    
    
    19,300,390
    
    
    
    1,463
    
    
    
    482,329
    
    
    
    (384,299
    )
    
    
    (1,869
    )
    
    
    97,701
  F-7




---



##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts expressed in thousands)
For the years ended December 31, 2007, 2008 and 2009
 2007
    
    
    2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$Cash flows from operating activitiesNet loss
    
    
    (7,111
    )
    
    
    (53,918
    )
    
    
    (38,469
    )
    
    
    (5,636
    )Adjustments to reconcile net loss to net cash used in operating activitiesStock-based compensation
    
    
    5,788
    
    
    
    8,738
    
    
    
    8,706
    
    
    
    1,275Impairment on property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    6,463
    
    
    
    947Impairment on inventories
    
    
    
    
    
    
    
    
    
    
    346
    
    
    
    51Amortization of long-term prepayment for land use right
    
    
    
    
    
    
    90
    
    
    
    90
    
    
    
    13Depreciation
    
    
    668
    
    
    
    2,093
    
    
    
    2,425
    
    
    
    355(Gain) loss on disposal of available-for-sale securities
    
    
    (15,500
    )
    
    
    14,049
    
    
    
    (111
    )
    
    
    (16
    )Impairment on available-for-sale securities
    
    
    
    
    
    
    15,213
    
    
    
    
    
    
    
    Impairment on other investments
    
    
    
    
    
    
    
    
    
    
    571
    
    
    
    84Finance costs
    
    
    
    
    
    
    
    
    
    
    5,760
    
    
    
    844Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    3,434
    
    
    
    503Change in fair value of derivative embedded in convertible note
    
    
    
    
    
    
    
    
    
    
    5,040
    
    
    
    738Change in fair value of warrants and option rights
    
    
    
    
    
    
    1,236
    
    
    
    (3,798
    )
    
    
    (556
    )Gain on disposal of subsidiaries
    
    
    (2,128
    )
    
    
    
    
    
    
    (4,560
    )
    
    
    (668
    )Income tax
credits
    
    
    
    
    
    
    (112
    )
    
    
    (112
    )
    
    
    (16
    )Changes in assets and liabilities:Decrease in trade accounts receivable
    
    
    482
    
    
    
    289
    
    
    
    398
    
    
    
    59Decrease (increase) in inventories
    
    
    1,240
    
    
    
    16
    
    
    
    (428
    )
    
    
    (63
    )(Increase) decrease in due from related parties and other current assets
    
    
    (378
    )
    
    
    201
    
    
    
    (6,519
    )
    
    
    (955
    )Decrease in trade accounts payable
    
    
    (397
    )
    
    
    (267
    )
    
    
    (124
    )
    
    
    (18
    )Increase in government subsidies
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    44Increase in amount due to related parties
    
    
    373
    
    
    
    2,301
    
    
    
    
    
    
    
    (Decrease) increase in other current liabilities
    
    
    (926
    )
    
    
    (4,348
    )
    
    
    2,260
    
    
    
    331Increase (decrease) in income taxes payable
    
    
    390
    
    
    
    (600
    )
    
    
    
    
    
    
    Increase in taxes recoverable
    
    
    
    
    
    
    (112
    )
    
    
    
    
    
    
    Decrease in cash classified as held for sale
    
    
    
    
    
    
    
    
    
    
    1,060
    
    
    
    155Net cash used in operating activities
    
    
    (17,499
    )
    
    
    (15,131
    )
    
    
    (17,268
    )
    
    
    (2,529
    )Cash flows from investing activitiesDecrease (increase) in account maintained with a security broker
    
    
    19,160
    
    
    
    11
    
    
    
    (20
    )
    
    
    (3
    )Acquisitions, net of cash acquired
    
    
    5,783
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents disposed of upon disposal of subsidiaries, net of
cash received
    
    
    900
    
    
    
    
    
    
    
    (830
    )
    
    
    (122
    )Proceeds from disposal of available-for-sale securities and trading securities
    
    
    156,382
    
    
    
    14,633
    
    
    
    28,794
    
    
    
    4,218Purchase of available-for-sales securities and trading securities
    
    
    (178,470
    )
    
    
    (13,100
    )
    
    
    (46,853
    )
    
    
    (6,863
    )Addition of construction in progress
    
    
    (829
    )
    
    
    
    
    
    
    
    
    
    
    Prepayment for acquisition of property and equipment
    
    
    (3,426
    )
    
    
    (4,525
    )
    
    
    4,525
    
    
    
    663Prepayment for business acquisition
    
    
    
    
    
    
    
    
    
    
    (20,602
    )
    
    
    (3,018
    )Purchases of property, plant and equipment
    
    
    (1,443
    )
    
    
    (10,972
    )
    
    
    (805
    )
    
    
    (118
    )Net cash used in investing activities
    
    
    (1,943
    )
    
    
    (13,953
    )
    
    
    (35,791
    )
    
    
    (5,243
    )Cash flows from financing activitiesProceeds
from issue of common stock, warrants and/or option rights
    
    
    29,422
    
    
    
    9,365
    
    
    
    1,240
    
    
    
    182Offering
costs for issue of common stock, warrants and/or option rights
    
    
    
    
    
    
    (469
    )
    
    
    (74
    )
    
    
    (11
    )Proceeds from exercise of stock options
    
    
    7,768
    
    
    
    358
    
    
    
    2,590
    
    
    
    379Proceeds from issue of convertible note, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    68,672
    
    
    
    10,059Overdraft from security account
    
    
    
    
    
    
    1,499
    
    
    
    (1,499
    )
    
    
    (220
    )Contribution
by a substantial shareholder - China Biotech
    
    
    
    
    
    
    7,923
    
    
    
    
    
    
    
    Net cash generated from financing activities
    
    
    37,190
    
    
    
    18,676
    
    
    
    70,929
    
    
    
    10,389
 F-8




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Amount expressed in thousands)
For the years ended December 31, 2007, 2008 and 2009
 2007
    
    
    2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$Effect of exchange rate changes on cash and cash equivalents
    
    
    (2,317
    )
    
    
    (668
    )
    
    
    (29
    )
    
    
    (4
    )Net increase (decrease) in cash and cash equivalents
    
    
    15,431
    
    
    
    (11,076
    )
    
    
    17,841
    
    
    
    2,613Cash and cash equivalents at beginning of year
    
    
    3,475
    
    
    
    18,906
    
    
    
    6,770
    
    
    
    992Less: Cash and cash equivalents at end of period from discontinued operations
    
    
    
    
    
    
    (1,060
    )
    
    
    
    
    
    
    Cash and cash equivalents at end of year
    
    
    18,906
    
    
    
    6,770
    
    
    
    24,611
    
    
    
    3,605Supplemental disclosure of cash flow informationIncome taxes paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest paid
    
    
    
    
    
    
    475
    
    
    
    39
    
    
    
    6Supplemental disclosure non-cash investing and financing activitiesIssue of shares in exchange for equity interest in Faster Group in 2007
    
    
    20,700
    
    
    
    
    
    
    
    
    
    
    
    Issue of warrants as offering costs for financing activities in 2008 and 2009
    
    
    
    
    
    
    682
    
    
    
    54
    
    
    
    8Construction costs funded through accrued expenses and other current
liabilities
    
    
    14,609
    
    
    
    
    
    
    
    231
    
    
    
    34Conversion of convertible note in 2009
    
    
    
    
    
    
    
    
    
    
    82,975
    
    
    
    12,154Purchase of property, plant and equipment funded through accrued expenses
and other current liabilities
    
    
    158
    
    
    
    81
    
    
    
    66
    
    
    
    10
  F-9




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 1 Nature of operations and basis of presentation
       F-10




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 2 Summary of significant accounting policies
  (a) Consolidation
   (b) Use of Estimates
  (c) Revenues
   (d) Income Taxes
   F-11




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 2 Summary of significant accounting policies (continued)
 (e) Concentration of credit risk
   (f) Foreign currency transaction gains and losses and translation of foreign currencies
     (g) Translation into United States Dollars
  (h) Property, plant and equipment and land use right
  Buildings
    
    20 yearsPlant and machinery
    
    10 yearsComputer equipment
    
    3 yearsFurniture, fixtures and office equipment
    
    3 yearsMotor vehicles
    
    5 years
 F-12




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 2 Summary of significant accounting policies (continued)
 (h) Property, plant and equipment and land use right (continued)
  (i) Construction in progress
  (j) Impairment or disposal of long lived assets
   (k) Trade accounts receivable
  (l) Inventories
  (m) Cash and cash equivalents
  (n) Investment in securities
   F-13




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 2 Summary of significant accounting policies (continued)
 (n) Investment in securities (continued)
    (o) Fair value Measurement
  (p) Research and development costs
  (q) Employee benefit plans
   (r) Segment reporting
  F-14




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 2 Summary of significant accounting policies (continued)
 (s) Comprehensive
(loss) income
  (t) Advertising cost
  (u) Earnings or loss per share
  (v) Stock-based compensation
  (w) Convertible note
  F-15




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 2 Summary of significant accounting policies (continued)
 (x) Warrants and option rights
  (y) Operating leases
  (z) Government subsidies
  (aa) Recent accounting pronouncements
    F-16




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 2 Summary of significant accounting policies (continued)
 (aa) Recent accounting pronouncements (continued)
     F-17




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 3 Acquisition
 Faster Assets Limited
  4 Income tax expenses (credits)
      F-18




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 4 Income tax expenses (credits) (continued)
 Composition of income tax expenses (credits)
  2007
    
    
    2008
    
    
    2009Rmb
    
    
    Rmb
    
    
    RmbCurrent income tax expenses (credits)- Continuing operations
    
    
    390
    
    
    
    (600
    )
    
    
    Deferred income tax credits
    
    
    
    
    
    
    (112
    )
    
    
    (112
    )Income tax expenses (credits)
    
    
    390
    
    
    
    (712
    )
    
    
    (112
    )
 Reconciliation of income tax expenses by applying PRC statutory Enterprise Income
Tax rate
  2007
    
    
    2008
    
    
    2009Rmb
    
    
    Rmb
    
    
    RmbNet loss before provision for income taxes
    
    
    (8,694
    )
    
    
    (55,488
    )
    
    
    (42,808
    )PRC statutory tax rate
    
    
    33%
    
    
    
    25%
    
    
    
    25%Income tax credit at PRC statutory EIT rate
    
    
    (2,869
    )
    
    
    (13,872
    )
    
    
    (10,702
    )Income or expenses adjusted for inter-group liabilities or
receivables written off
    
    
    72
    
    
    
    
    
    
    
    Effect of income tax rate differences in other jurisdictions
    
    
    4,186
    
    
    
    6,984
    
    
    
    7,101Income not subject to taxation
    
    
    (22
    )
    
    
    (9
    )
    
    
    Expenses not deductible for taxation purpose
    
    
    21
    
    
    
    4,714
    
    
    
    2,007Effect of utilization of tax losses not previously recognized
    
    
    1,033
    
    
    
    
    
    
    
    Effect of preferential tax treatment
    
    
    226
    
    
    
    
    
    
    
    Effect of tax losses under recognized in prior years
    
    
    
    
    
    
    (363
    )
    
    
    Effect of over provision in prior years
    
    
    
    
    
    
    (600
    )
    
    
    Effect of tax losses written off
    
    
    713
    
    
    
    
    
    
    
    Effect of tax losses from disposed entities
    
    
    4,840
    
    
    
    
    
    
    
    Effect of change in PRC statutory tax rate
    
    
    5
    
    
    
    
    
    
    
    Effect of change in HK statutory tax rate
    
    
    
    
    
    
    21
    
    
    
    Change in valuation allowance
    
    
    (7,815
    )
    
    
    2,413
    
    
    
    1,482Total income tax expenses
    
    
    390
    
    
    
    (712
    )
    
    
    (112
    )
 F-19




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 4
Income tax expenses (credits) (continued)
 The principal components of the deferred income tax assets and liabilities are as follows:
 December 31, 2008
    
    
    December 31, 2009Rmb
    
    
    RmbDeferred tax assets:Tax loss carryforwards
    
    
    6,190
    
    
    
    4,167Less: valuation allowance
    
    
    (6,190
    )
    
    
    (4,167
    )Non-current deferred tax assets, net
    
    
    
    
    
    
    Deferred tax liability:Property, plant and equipment, net
    
    
    (1,938
    )
    
    
    (1,836
    )Prepayment for land use right
    
    
    (480
    )
    
    
    (470
    )Non-current deferred tax liabilities
    
    
    (2,418
    )
    
    
    (2,306
    )Total
    
    
    (2,418
    )
    
    
    (2,306
    )Reported as:Current deferred tax assets
    
    
    
    
    
    
    Current deferred tax liabilities
    
    
    
    
    
    
    Subtotal
    
    
    
    
    
    
    Non-current deferred tax assets
    
    
    
    
    
    
    Non-current deferred tax liabilities
    
    
    (2,418
    )
    
    
    (2,306
    )Total
    
    
    (2,418
    )
    
    
    (2,306
    )
   F-20




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 5 Disposal and discontinued operations
    2007RmbNet assets disposed of (excluding cash and cash equivalents):Other assets
    
    
    750Property, plant and equipment, net
    
    
    46Deferred tax liabilities
    
    
    (491
    )Other liabilities and accrued expenses
    
    
    (1,533
    )(1,228
    )Gain on disposal of discontinued operations
    
    
    2,128900Settled by:Consideration received
    
    
    935Cash and cash equivalents disposed
    
    
    (35
    )900
    2008RmbNet assets disposed of (excluding cash and cash equivalents):Other liabilities and accrued expenses
    
    
    (1
    )(1
    )Gain on disposal of discontinued operations
    
    
    109Settled by:Consideration received
    
    
    9Cash and cash equivalents disposed
    
    
    9
 F-21




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 5 Disposal and discontinued operations (continued)
    2008RmbAssets held for saleCash and cash equivalents
    
    
    1,060Trade accounts receivable, net
    
    
    678Inventories  merchandise for resale
    
    
    40Value added tax and business tax recoverable
    
    
    279Prepaid expenses and other assets
    
    
    324Property, plant & equipment, net
    
    
    582,439Liabilities associated with assets classified as held for saleTrade accounts payable
    
    
    (218
    )Tax payables
    
    
    (151
    )Other liabilities and accrued expenses
    
    
    (991
    )(1,360
    )
  2009RmbNet assets disposed of (excluding cash and cash equivalents):Trade accounts receivable, net
    
    
    288Inventories  merchandise for resale
    
    
    42Value added tax and business tax recoverable
    
    
    279Prepaid expenses and other assets
    
    
    298Property, plant and equipment, net
    
    
    49Trade accounts payable
    
    
    (94
    )Tax payable
    
    
    25Other liabilities and accrued expenses
    
    
    (2,027
    )Accumulated other comprehensive loss
    
    
    (4,250
    )(5,390
    )Gain on disposal of Jingle Group
    
    
    4,560(830
    )Discharged by:Consideration received
    
    
    176Cash and cash equivalents disposed
    
    
    (1,006
    )(830
    )
 F-22




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 5 Disposal and discontinued operations (continued)
  Year ended
    
    
    Year ended
    
    
    Year endedDecember
    
    
    December
    
    
    December31, 2007
    
    
    31, 2008
    
    
    31, 2009Rmb
    
    Rmb

    
    Rmb

    
    Total

    
    Rmb

    
    Rmb

    
    Total

    
    Rmb

    
    TotalGreen

    
    Jingle

    
    
    
    
    
    Green

    
    Jingle

    
    
    
    
    
    JingleCNT
    
    Energy

    
    Group

    
    2007

    
    Energy

    
    Group

    
    2008

    
    Group

    
    2009Revenues
    
    
    17
    
    
    
    
    
    
    
    7,680
    
    
    
    7,697
    
    
    
    
    
    
    
    5,518
    
    
    
    5,518
    
    
    
    4
    
    
    
    4Cost of sales
    
    
    (17
    )
    
    
    
    
    
    
    (3,866
    )
    
    
    (3,883
    )
    
    
    
    
    
    
    (1,876
    )
    
    
    (1,876
    )
    
    
    (2
    )
    
    
    (2
    )Gross profit
    
    
    
    
    
    
    
    
    
    
    3,814
    
    
    
    3,814
    
    
    
    
    
    
    
    3,642
    
    
    
    3,642
    
    
    
    2
    
    
    
    2Selling expenses
    
    
    
    
    
    
    
    
    
    
    (1,108
    )
    
    
    (1,108
    )
    
    
    
    
    
    
    (595
    )
    
    
    (595
    )
    
    
    (182
    )
    
    
    (182
    )General and administrative
expenses
    
    
    (399
    )
    
    
    (13
    )
    
    
    (3,613
    )
    
    
    (4,025
    )
    
    
    (25
    )
    
    
    (2,899
    )
    
    
    (2,924
    )
    
    
    (153
    )
    
    
    (153
    )Operating
(loss) profit
    
    
    (399
    )
    
    
    (13
    )
    
    
    (907
    )
    
    
    (1,319
    )
    
    
    (25
    )
    
    
    148
    
    
    
    123
    
    
    
    (333
    )
    
    
    (333
    )Other income
    
    
    
    
    
    
    
    
    
    
    1,164
    
    
    
    1,164
    
    
    
    
    
    
    
    725
    
    
    
    725
    
    
    
    
    
    
    
    Profit on
disposal of subsidiaries
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    2,128
    
    
    
    10
    
    
    
    
    
    
    
    10
    
    
    
    4,560
    
    
    
    4,560Profit (loss) from operations
before income tax expenses
    
    
    1,729
    
    
    
    (13
    )
    
    
    257
    
    
    
    1,973
    
    
    
    (15
    )
    
    
    873
    
    
    
    858
    
    
    
    4,227
    
    
    
    4,227Income tax expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Profit (loss) from operations
    
    
    1,729
    
    
    
    (13
    )
    
    
    257
    
    
    
    1,973
    
    
    
    (15
    )
    
    
    873
    
    
    
    858
    
    
    
    4,227
    
    
    
    4,227Carrying amounts of
total assets and liabilities
included as part of the
disposal group were as
follows:Total assets
    
    
    831
    
    
    
    
    
    
    
    
    
    
    
    831
    
    
    
    
    
    
    
    2,439
    
    
    
    2,439
    
    
    
    1,962
    
    
    
    1,962Total liabilities
    
    
    (2,024
    )
    
    
    
    
    
    
    
    
    
    
    (2,024
    )
    
    
    (1
    )
    
    
    (1,360
    )
    
    
    (1,361
    )
    
    
    (6,346
    )
    
    
    (6,346
    )
 F-23




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 6 Other assets
  December 31,
    
    
    December 31,2008
    
    
    2009Rmb
    
    
    RmbRental and utility deposits
    
    
    146
    
    
    
    124Advance to staff
    
    
    400
    
    
    
    400Prepayment for insurance
    
    
    210
    
    
    
    156Prepayment for raw materials
    
    
    
    
    
    
    23Prepayment for decoration
    
    
    134
    
    
    
    Others
    
    
    51
    
    
    
    13941
    
    
    
    716
 7 Prepayment for land use right
  8 Property, plant and equipment, net
 December 31,
    
    
    December 31,2008
    
    
    2009Rmb
    
    
    RmbBuildings
    
    
    20,271
    
    
    
    24,246Plant and machinery
    
    
    8,939
    
    
    
    8,973Computer equipment
    
    
    509
    
    
    
    486Furniture, fixtures and office equipment
    
    
    2,497
    
    
    
    2,022Motor vehicles
    
    
    567
    
    
    
    567Total
    
    
    32,783
    
    
    
    36,294Less: accumulated depreciation
    
    
    (3,157
    )
    
    
    (5,249
    )Less: impairment
    
    
    
    
    
    
    (6,463
    )Add: construction in progress
    
    
    3,705
    
    
    
    67633,331
    
    
    
    25,258
   F-24




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 9 Prepayment for acquisition of property, plant and machinery
  10 Other liabilities and accrued expenses
 December 31,
    
    
    December 31,2008
    
    
    2009Rmb
    
    
    RmbDeposits received
    
    
    4
    
    
    
    36Accrued salaries and staff benefits
    
    
    367
    
    
    
    831Accrued liability for purchase of property, plant and equipment
    
    
    81
    
    
    
    297Accrued filing fee
    
    
    54
    
    
    
    46Interest payable
    
    
    
    
    
    
    1,900Others
    
    
    155
    
    
    
    355661
    
    
    
    3,465
 11 Fair Value measurements
      Investment in Equity Securities (classified as trading and AFS securities)
 SignificantQuoted Prices in Active
    
    
    Other
    
    
    SignificantMarkets for Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Balance as ofAssets
    
    
    Inputs
    
    
    Inputs
    
    
    December 31, 2008(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbHong Kong
marketable equity
securities
    
    
    4,712
    
    
    
    
    
    
    
    
    
    
    
    4,712
 F-25




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 11 Fair Value measurements (continued)
 SignificantQuoted Prices in Active
    
    
    Other
    
    
    SignificantMarkets for Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Balance as ofAssets
    
    
    Inputs
    
    
    Inputs
    
    
    December 31, 2009(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbHong Kong
marketable equity
securities
    
    
    31,257
    
    
    
    
    
    
    
    
    
    
    
    31,257
  Liabilities relating to warrants and option rights
 SignificantQuoted Prices in Active
    
    
    Other
    
    
    SignificantMarkets for Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Balance as ofAssets
    
    
    Inputs
    
    
    Inputs
    
    
    December 31, 2008(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbWarrant B (Note 16)
    
    
    
    
    
    
    
    
    
    
    2,289
    
    
    
    2,289
 SignificantQuoted Prices in Active
    
    
    Other
    
    
    SignificantMarkets for Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Balance as ofAssets
    
    
    Inputs
    
    
    Inputs
    
    
    January 1, 2009(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbWarrant A and
option rights
determined on
January 1, 2009
(Notes 2(x) and 16)
    
    
    
    
    
    
    
    
    
    
    7,527
    
    
    
    7,527
 SignificantQuoted Prices in Active
    
    
    Other
    
    
    SignificantMarkets for Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Balance as ofAssets
    
    
    Inputs
    
    
    Inputs
    
    
    December 31, 2009(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbWarrant A
(Notes 16)
    
    
    
    
    
    
    
    
    
    
    3,003
    
    
    
    3,003
  F-26




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 11 Fair Value measurements (continued)
  Warrants and option rights
 2008
    
    
    2009Rmb
    
    
    RmbBeginning balance at January 1
    
    
    
    
    
    
    2,289Fair value on January 1, 2009 upon adoption of
ASC 815-40-15 (Note 2(x))
    
    
    
    
    
    
    7,527Issuances
    
    
    1,053
    
    
    
    617Total gains and losses (realized/unrealized):Included in earnings
    
    
    1,236
    
    
    
    (3,798
    )Included in other comprehensive income (loss)
    
    
    
    
    
    
    Settlement/Cancelled upon expiration
    
    
    
    
    
    
    (3,632
    )Ending balance at December 31
    
    
    2,289
    
    
    
    3,003
   Derivative
embedded in convertible note
 2009RmbBeginning balance at January 1
    
    
    Issuances
    
    
    29,960Total gains and losses (realized/unrealized) included in
earnings
    
    
    5,040Settlement
    
    
    (35,000
    )Ending balance at December 31
    
    
    
 12 Stock-based compensation
 (a) Stock Option
   F-27




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 12 Stock-based compensation (continued)
 (a) Stock
Option (continued)
       F-28




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 12 Stock-based compensation (continued)
  Year Ended December 31,2007
    
    
    2008
    
    
    2009Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    average
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exercise
    
    
    
    
    
    
    exerciseprice
    
    
    
    
    
    
    price
    
    
    
    
    
    
    priceNumber of
    
    
    (US$ per
    
    
    Number
    
    
    (US$ per
    
    
    Number
    
    
    (US$ peroptions
    
    
    option)
    
    
    of options
    
    
    option)
    
    
    of options
    
    
    option)Outstanding at beginning
of year
    
    
    1,565,000
    
    
    
    2.66
    
    
    
    2,053,000
    
    
    
    2.98
    
    
    
    4,353,334
    
    
    
    2.43Granted
    
    
    1,000,000
    
    
    
    3.25
    
    
    
    2,410,000
    
    
    
    2.00
    
    
    
    1,366,000
    
    
    
    2.14Exercised
    
    
    (437,000
    )
    
    
    2.44
    
    
    
    (16,666
    )
    
    
    3.13
    
    
    
    (136,864
    )
    
    
    2.75Forfeited
    
    
    (75,000
    )
    
    
    3.01
    
    
    
    (93,000
    )
    
    
    3.54
    
    
    
    (168,000
    )
    
    
    1.92Outstanding at end of year
    
    
    2,053,000
    
    
    
    2.98
    
    
    
    4,353,334
    
    
    
    2.43
    
    
    
    5,414,470
    
    
    
    1.82
   Options exercisableOptions outstanding
    
    
    
    
    
    
    WeightedWeighted
    
    
    Weighted
    
    
    
    
    
    
    averageaverage
    
    
    average
    
    
    
    
    
    
    exerciseremaining
    
    
    exercise
    
    
    
    
    
    
    priceNumber
    
    
    contractual
    
    
    price (US$
    
    
    Number
    
    
    (US$ perDate of grant
    
    outstanding
    
    
    life
    
    
    per share)
    
    
    exercisable
    
    
    share)February 8, 2005
    
    
    50,000
    
    
    7.11 years
    
    
    1.15
    
    
    
    50,000
    
    
    
    1.15September 20, 2005
    
    
    278,000
    
    
    7.72 years
    
    
    1.85
    
    
    
    278,000
    
    
    
    1.85September 18, 2006
    
    
    770,000
    
    
    8.28 years
    
    
    3.18
    
    
    
    770,000
    
    
    
    3.18May 23, 2007
    
    
    740,000
    
    
    4.39 years
    
    
    3.13
    
    
    
    
    
    
    
    August 3, 2007
    
    
    80,000
    
    
    4.59 years
    
    
    3.53
    
    
    
    
    
    
    
    August 20, 2007
    
    
    135,000
    
    
    4.64 years
    
    
    3.74
    
    
    
    
    
    
    
    2,053,000
    
    
    
    
    
    
    
    
    
    
    
    1,098,000
 F-29




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 12 Stock-based compensation (continued)
  Options exercisableOptions outstanding
    
    
    
    
    
    
    
    
    
    
    WeightedWeighted
    
    
    Weighted
    
    
    
    
    
    
    averageaverage
    
    
    average
    
    
    
    
    
    
    exerciseremaining
    
    
    exercise
    
    
    
    
    
    
    priceNumber
    
    
    contractual
    
    
    price (US$
    
    
    Number
    
    
    (US$ perDate of grant
    
    outstanding
    
    
    life
    
    
    per share)
    
    
    exercisable
    
    
    share)February 8, 2005
    
    
    50,000
    
    
    6.11 years
    
    
    1.15
    
    
    
    50,000
    
    
    
    1.15September 20, 2005
    
    
    278,000
    
    
    6.72 years
    
    
    1.85
    
    
    
    278,000
    
    
    
    1.85September 18, 2006
    
    
    770,000
    
    
    7.28 years
    
    
    3.18
    
    
    
    770,000
    
    
    
    3.18May 23, 2007
    
    
    693,334
    
    
    3.39 years
    
    
    3.13
    
    
    
    219,991
    
    
    
    3.13August 3, 2007
    
    
    80,000
    
    
    3.59 years
    
    
    3.53
    
    
    
    26,665
    
    
    
    3.53August 20, 2007
    
    
    72,000
    
    
    3.64 years
    
    
    3.74
    
    
    
    23,998
    
    
    
    3.74July 28, 2008
    
    
    130,000
    
    
    4.57 years
    
    
    4.08
    
    
    
    
    
    
    
    November 10, 2008
    
    
    870,000
    
    
    4.86 years
    
    
    2.04
    
    
    
    
    
    
    
    December 30, 2008
    
    
    1,410,000
    
    
    5.00 years
    
    
    1.79
    
    
    
    
    
    
    
    4,353,334
    
    
    
    
    
    
    
    
    
    
    
    1,368,654
  Options exercisableOptions outstanding
    
    
    
    
    
    
    
    
    
    
    WeightedWeighted
    
    
    Weighted
    
    
    
    
    
    
    averageaverage
    
    
    average
    
    
    
    
    
    
    exerciseremaining
    
    
    exercise
    
    
    
    
    
    
    priceNumber
    
    
    contractual
    
    
    price (US$
    
    
    Number
    
    
    (US$ perDate of grant
    
    outstanding
    
    
    life
    
    
    per share)
    
    
    exercisable
    
    
    share)February 8, 2005
    
    
    50,000
    
    
    5.11 years
    
    
    1.15
    
    
    
    50,000
    
    
    
    1.15September 20, 2005
    
    
    255,000
    
    
    5.72 years
    
    
    1.85
    
    
    
    255,000
    
    
    
    1.85September 18, 2006
    
    
    725,000
    
    
    6.28 years
    
    
    3.18
    
    
    
    725,000
    
    
    
    3.18May 23, 2007
    
    
    578,334
    
    
    2.39 years
    
    
    3.13
    
    
    
    578,334
    
    
    
    3.13August 3, 2007
    
    
    80,000
    
    
    2.59 years
    
    
    3.53
    
    
    
    80,000
    
    
    
    3.53August 20, 2007
    
    
    56,000
    
    
    2.64 years
    
    
    3.74
    
    
    
    56,000
    
    
    
    3.74July 28, 2008
    
    
    130,000
    
    
    3.57 years
    
    
    4.08
    
    
    
    43,331
    
    
    
    4.08November 10, 2008
    
    
    824,136
    
    
    3.86 years
    
    
    2.04
    
    
    
    244,127
    
    
    
    2.04December 30, 2008
    
    
    1,410,000
    
    
    4.00 years
    
    
    1.79
    
    
    
    469,990
    
    
    
    1.79July 7, 2009
    
    
    30,000
    
    
    4.52 years
    
    
    2.35
    
    
    
    
    
    
    
    October 1, 2009
    
    
    1,276,000
    
    
    4.75 years
    
    
    2.12
    
    
    
    53,000
    
    
    
    2.125,414,470
    
    
    
    
    
    
    
    
    
    
    
    2,554,782
    F-30




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 12 Stock-based compensation (continued)
          F-31




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 12 Stock-based compensation (continued)
 Stock-based compensation to non-employees
       2007Granted onMay 23, 2007
    
    
    August 3, 2007
    
    
    August 20, 2007Average risk-free rate of return(1)
    
    
    4.480
    %
    
    
    4.422
    %
    
    
    4.269
    %Volatility rate(2)
    
    
    72.33
    %
    
    
    71.98
    %
    
    
    74.97
    %Dividend yield(3)
    
    
    
    
    
    
    
    
    
    
    
 F-32




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 12 Stock-based compensation (continued)
 2008Granted onJuly 28, 2008
    
    
    November 10, 2008
    
    
    December 30, 2008Average risk-free rate of return(1)
    
    
    3.393
    %
    
    
    2.607
    %
    
    
    1.508
    %Volatility rate(2)
    
    
    76.32
    %
    
    
    85.20
    %
    
    
    86.57
    %Dividend yield(3)
    
    
    
    
    
    
    
    
    
    
    
 2009Granted onJuly 07, 2009
    
    

Oct 01, 2009Average risk-free rate of return(1)
    
    
    2.79
    %
    
    
    2.28
    %Volatility rate(2)
    
    
    79.65
    %
    
    
    79.68
    %Dividend yield(3)
    
    
    
    
    
    
    
 
 1.
    
    The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the
expected life of the awards in effect at the time of grant.2.
    
    Expected volatility is estimated based on the historical volatility of the Companys stock
price and/or the comparable public-traded companies.3.
    
    The Company has no expectation of paying dividends on its
common stock. (b) Stock Purchase Warrants
    F-33




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated
 12 Stock-based compensation (continued)
 2007
    
    
    2007
    
    
    2008July 2, 2007
    
    
    August 31, 2007
    
    
    August 29, 2008Average risk-free rate of return
    
    
    4.584
    %
    
    
    4.06
    %
    
    
    2.214
    %Volatility rate
    
    
    67.81
    %
    
    
    76.51
    %
    
    
    75.77
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
 13 Net (loss) earnings per share
    Year ended December 31,2007
    
    
    2008
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb(Amounts expressed in thousands, except per share data)Net loss for the year attributable to the
shareholders of the Company
    
    
    (7,111
    )
    
    
    (53,918
    )
    
    
    (38,469
    )Net loss from continuing operations attributable to
holders of Common Stock, basic and diluted
    
    
    (9,084
    )
    
    
    (54,776
    )
    
    
    (42,696
    )Net income from discontinued operations attributable
to holders of Common Stock, basic and diluted
    
    
    1,973
    
    
    
    858
    
    
    
    4,227Weighted-average shares used in computing basic and
diluted net loss (or earnings) per share
    
    
    14,249
    
    
    
    16,160
    
    
    
    15,927Net loss per share (in Rmb)- Basic and diluted
    
    
    (0.50
    )
    
    
    (3.34
    )
    
    
    (2.42
    )Net loss per share from continuing operations (in Rmb)- Basic and diluted
    
    
    (0.64
    )
    
    
    (3.39
    )
    
    
    (2.68
    )Net earnings per share from discontinued operations
(in Rmb)- Basic and diluted
    
    
    0.14
    
    
    
    0.05
    
    
    
    0.26
 F-34




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 13 Net (loss) earnings per share (continued)
  14 Related party transactions
  Year ended December 31,2007
    
    
    2008
    
    
    2009Rmb
    
    
    Rmb
    
    
    RmbTransactions with related partiesSubscription proceeds receivable from China Biotech (Note a)
    
    
    
    
    
    
    
    
    
    
    Acquisition of Faster Group from China Biotech (Note b)
    
    
    20,700
    
    
    
    
    
    
    
    Prepayment for acquisition of property from ZMRE (Note c)
    
    
    3,301
    
    
    
    440
    
    
    
    Receipt for acquisition of property from China Biotech (Note d)
    
    
    
    
    
    
    7,302
    
    
    
    Payment for acquisition of property on behalf of China Biotech (Note d)
    
    
    
    
    
    
    5,000
    
    
    
    Loan from
Alan Li (Note e)
    
    
    
    
    
    
    
    
    
    
    792Repayment
overdraft of security account China Biotech (Note f)
    
    
    
    
    
    
    
    
    
    
    440CGHL issued an convertible note in principal amount of US$10 million to CMTF
Private Equity One (Note g)
    
    
    
    
    
    
    
    
    
    
    68,672Deposit payment to China Biotech for acquisition of production line (Note h)
    
    
    
    
    
    
    
    
    
    
    6,867
 
 Note(a)
    
    On November 27, 2006, the Company entered into a subscription agreement with China Biotech to
issue 1,500,000 new shares of Common Stock and 2,000,000 warrants at US$2.50 and US$0.01 each,
respectively. The total consideration was Rmb29,422. The transaction was completed on January
12, 2007 and the subscription proceeds were fully received by the Company on that same date.
Following the completion of the transaction, China Biotech became the major shareholder of the
Company by owning 24.74% of the total outstanding shares of the Company.(b)
    
    On November 8, 2007, the Company entered into an
agreement with China Biotech, one of the Companys major shareholders, to acquire Faster Assets and its subsidiary, which we refer to
collectively as the Faster Group. We paid the Rmb20,700 consideration through the issuance of
782,168 shares of common stock and 1,000,000 shares of preferred stock and completed the
acquisition in December 2007.(c)
    
    Zhangzhou Trendar Tech and Broad Shine, two wholly-owned subsidiaries of the Company, acquired
four properties at a consideration of Rmb3,301 in total from Zhangzhou Merchants Real Estate
Ltd. (ZMRE) on July 3, 2007 and October 22, 2007, respectively. On March 20, 2008, Broad
Shine acquired one property for consideration of Rmb440 from ZMRE. China Merchant Group
(CMG) is the ultimate holding company of China Biotech, and ZMRE is a subsidiary of CMG.(d)
    
    Prior to the acquisition (see Note 3), Faster Group had no business activities and its major
asset was a right to purchase a real estate located in the Tangyang Industrial Zone of China
Merchants Zhangzhou Development Zone, from China Merchants Zhangzhou Development Zone Ltd., or
CMZDZ, for a consideration of Rmb13,085, of which Rmb5,783 was borne by the Faster Group and
Rmb7,302 was committed to be settled by China Biotech. In 2008, the Group received Rmb7,302
from China Biotech and paid Rmb5,000 to CMZDZ. The remaining balance due to CMZDZ is
Rmb8,085. (see note 3 above)(e)
    
    On February 25, 2009, BHLHK, a wholly owned subsidiary
of the Company, entered into a loan
agreement with Mr. Alan Li to borrow HK$0.90 million for 10 months without interest. Mr. Alan
Li is one of the directors of BHLHK and is the Chairman of the Board of Directors, Executive
Director and Chief Executive Officer of the Company. The loan is for its working capital purposes and was
repaid in May 2009. F-35




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 14 Related party transactions (continued)
 (f)
    
    Represents repayment of overdraft of securities account on behalf of BHLHK by China Biotech
on February 5, 2009.(g)
    
    In April 2009, the Company and two of our subsidiaries, China Green Industry Group Ltd. and China
Green Holdings Ltd., or CGHL, entered into a subscription agreement with CMTF Private Equity
One. Pursuant to the subscription agreement, CGHL issued to CMTF Private Equity One a
convertible note in a principal amount of US$10.0 million with three-year maturity and an
interest rate equal to the Hong Kong Prime Rate. The convertible note was, at the holders
option, either convertible into the outstanding ordinary shares of CGHL or exchangeable for
shares of our common stock. In November 2009, CMTF Private Equity One exchanged the
convertible note for 3,322,260 shares of our common stock. CMTF Private Equity One is one of
the funds managed by CMS Capital (HK) Co., Ltd. (formerly known as CMTF Asset Management
Limited). China Merchants Securities Investment Ltd, one of subsidiaries of China Merchants
Group, holds 100% of equity interest of CMS Capital (HK) Co., Ltd..(h)
    
    On December 15, 2009, the Company entered into an agency contract regarding purchase of one
a-Si thin film solar panel production line (the Agency Contract) with China Biotech,
with approval from our Audit Committee and the Board of Directors of
the Company. Pursuant to the Agency Contract, the Company appointed China Biotech as its representative to
liaise and negotiate with equipment supplier to purchase one a-Si thin film solar panel
production line, together with right of use of its patents, proprietary technology, technical
service and training. The Company has paid USD1 million to China Biotech as deposit for the
purchase. On May 13, 2010, both parties entered into a supplementary agreement to the Agency
Contract to extend the delivery date for three more months. On June 22, 2010, the Company
terminated the Agency Contract, as amended, with China Biotech and the deposit was refunded in
full to the Company upon termination.
  December 31,2008
    
    
    2009Rmb
    
    
    RmbBalances with related parties:Due from related partiesFunds held by China Biotech for potential acquisition
of technology and business in China
(Note h and i)
    
    
    5,282
    
    
    
    12,0535,282
    
    
    
    12,053Due to related parties:Due to China Biotech (Note j)
    
    
    859
    
    
    
    859Due to CMZDZ (Note d)
    
    
    8,085
    
    
    
    8,0858,944
    
    
    
    8,944
 
 (i)
    
    China Biotech has been the largest shareholder of the Company since January 12, 2007. In view
of China Biotechs experience with acquisitions in China, the Group deposited HK$6,000 with
China Biotech for the purpose of making (with the assistance of China Biotech) potential
acquisitions of technology and businesses in China. There was no agreement signed for the
funds deposited with China Biotech, and the Group can withdraw the funds without any
restrictions.(j)
    
    Represents administrative expenses paid on behalf of Faster Assets and Shenzhen Helios Energy
by China Biotech in China.Except for Note e, the balances with related parties are unsecured and interest-free, and have
no fixed terms of repayment. 15 Retirement benefits
  F-36




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 16 Common stock
            F-37




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 17 Series A non-convertible and non-redeemable Preferred Stock
   
    
    Voting rightThe 1,000,000 shares of Preferred Stock have an aggregate voting power of 25% of the
combined voting power of the Companys shares, Common Stock and Preferred Stock.
    
    DividendsThe holder is entitled to receive dividends only as, when and if such dividends are
declared by the Board with respect to shares of Preferred Stock.
    
    Liquidation preferenceIn the event of any distribution of assets upon any liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, after payment or provision for
payments of the debts and other liabilities of the Company, the holder is entitled to
receive out of assets of the Company, whether such assets are capital, surplus or
earnings, an amount equal to the consideration paid by him for each such share plus any
accrued and unpaid dividends with respect to such shares of Preferred Stock through the
date of such liquidation, dissolution or winding up.
    
    RedemptionThe issuer has no right to redeem the Preferred Stock.
    
    Non-convertibleThe Preferred Stock are not convertible into common stock .
 18 Available-for-sale securities
   December 31,2008
    
    
    2009Rmb
    
    
    RmbCost of available-for-sale securities
    
    
    19,925
    
    
    
    18,204Unrecognized gain
    
    
    
    
    
    
    9,228Impairment of available-for-sales securities
    
    
    (15,213
    )
    
    
    Fair value of available-for-sale securities
    
    
    4,712
    
    
    
    27,432
 19. Other non-current asset
  F-38




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 20. Convertible note
  21. Overdraft from security account
  22 Contingencies and commitments
   As of December 31,
    
    Rmb2010
    
    
    7862011
    
    
    2532012
    
    
    1562013
    
    
    46Total
    
    
    1,241
  F-39




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 22 Contingencies and commitments (continued)
   ®
 23 Restricted net assets
  24 Segment information
   F-40




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 24 Segment information (continued)
  Netidentifiable
    
    
    DepreciationOperating
    
    
    
    
    
    
    assets/
    
    
    and
    
    
    CapitalRevenues
    
    
    loss
    
    
    Assets
    
    
    (liabilities)
    
    
    amortization
    
    
    expendituresRmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb2009Solar Energy
Operations
    
    
    
    
    
    
    (12,329
    )
    
    
    32,576
    
    
    
    20,633
    
    
    
    2,174
    
    
    
    1,298Corporate*
    
    
    
    
    
    
    (20,002
    )
    
    
    86,859
    
    
    
    77,068
    
    
    
    341
    
    
    
    81Group
    
    
    
    
    
    
    (32,331
    )
    
    
    119,435
    
    
    
    97,701
    
    
    
    2,515
    
    
    
    1,3792008Solar Energy
Operations
    
    
    10
    
    
    
    (4,334
    )
    
    
    43,009
    
    
    
    31,494
    
    
    
    1,679
    
    
    
    7,044Corporate*
    
    
    
    
    
    
    (20,004
    )
    
    
    17,171
    
    
    
    9,657
    
    
    
    504
    
    
    
    47Sub-total
    
    
    10
    
    
    
    (24,338
    )
    
    
    60,180
    
    
    
    41,151
    
    
    
    2,183
    
    
    
    7,091Discontinued
operation-IT
Operations
    
    
    
    
    
    
    
    
    
    
    2,439
    
    
    
    1,079
    
    
    
    
    
    
    
    16Group
    
    
    10
    
    
    
    (24,338
    )
    
    
    62,619
    
    
    
    42,230
    
    
    
    2,183
    
    
    
    7,1072007Solar Energy
Operations
    
    
    
    
    
    
    (1,073
    )
    
    
    55,761
    
    
    
    32,007
    
    
    
    138
    
    
    
    36,873Corporate*
    
    
    
    
    
    
    (23,422
    )
    
    
    57,019
    
    
    
    47,148
    
    
    
    326
    
    
    
    960Sub-total
    
    
    
    
    
    
    (24,495
    )
    
    
    112,780
    
    
    
    79,155
    
    
    
    464
    
    
    
    37,833Discontinued
operation-IT
Operations
    
    
    
    
    
    
    
    
    
    
    3,108
    
    
    
    1,034
    
    
    
    
    
    
    
    74Group
    
    
    
    
    
    
    (24,495
    )
    
    
    115,888
    
    
    
    80,189
    
    
    
    464
    
    
    
    37,907
 F-41




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 24 Segment information (continued)
 
 *
    
    The detail of corporate/unallocated items including mainly staff costs, legal and
professional fees are as follows:. 2007
    
    2008
    
    2009Rmb
    
    Rmb
    
    RmbUnallocated general and administrative expenses
    
    
    (23,422
    )
    
    
    (20,004
    )
    
    
    (20,002
    )Operating loss
    
    
    (23,422
    )
    
    
    (20,004
    )
    
    
    (20,002
    )Cash and cash equivalents
    
    
    5,129
    
    
    
    1,688
    
    
    
    22,009Other
investments
    
    
    
    
    
    
    
    
    
    
    336Trading securities
    
    
    
    
    
    
    
    
    
    
    3,825Available-for-sale securities
    
    
    44,808
    
    
    
    4,712
    
    
    
    27,432Due from related parties
    
    
    5,612
    
    
    
    5,282
    
    
    
    12,053Prepayment for acquisition of property, plant
and equipment
    
    
    
    
    
    
    4,525
    
    
    
    Other
non-current assets
    
    
    
    
    
    
    
    
    
    
    20,602Other assets
    
    
    1,470
    
    
    
    963
    
    
    
    603Due to related parties
    
    
    (6,008
    )
    
    
    (176
    )
    
    
    (177
    )Deferred tax liabilities
    
    
    (1,325
    )
    
    
    
    
    
    
    Overdraft from security account
    
    
    
    
    
    
    (1,499
    )
    
    
    Liabilities relating to warrants
    
    
    
    
    
    
    (2,289
    )
    
    
    (3,003
    )Other liabilities
    
    
    (2,538
    )
    
    
    (3,549
    )
    
    
    (6,612
    )Net identifiable assets/ (liabilities)
    
    
    47,148
    
    
    
    9,657
    
    
    
    77,068
    25 Subsequent events
  1. Acquisition of Xintang Media,
  F-42




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts expressed in thousands, except share data or unless otherwise stated)
 25 Subsequent events (continued)
 2. Private Placement of US$6 Million
  3. Establishment of solar modules factory
  26. Additional information- condensed financial statements of the Company
    F-43




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
 (Amounts
expressed in thousands)
 For the years ended December 31, 2007, 2008 and 2009
 2007
    
    
    2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$General and administrative expenses
    
    
    (16,719
    )
    
    
    (14,657
    )
    
    
    (16,253
    )
    
    
    (2,381
    )Operating loss
    
    
    (16,719
    )
    
    
    (14,657
    )
    
    
    (16,253
    )
    
    
    (2,381
    )Other income (expense):Share of results of subsidiaries
    
    
    6,870
    
    
    
    (37,912
    )
    
    
    (16,175
    )
    
    
    (2,369
    )Interest income
    
    
    625
    
    
    
    6
    
    
    
    
    
    
    
    Finance costs
    
    
    
    
    
    
    
    
    
    
    (5,760
    )
    
    
    (844
    )Change in fair value of derivative embedded in convertible note
    
    
    
    
    
    
    
    
    
    
    3,798
    
    
    
    556Change in fair value of warrants and option rights
    
    
    
    
    
    
    (1,236
    )
    
    
    (5,040
    )
    
    
    (738
    )Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    (3,434
    )
    
    
    (503
    )Exchange loss
    
    
    
    
    
    
    (79
    )
    
    
    (165
    )
    
    
    (25
    )Gain on disposal of subsidiaries
    
    
    2,128
    
    
    
    
    
    
    
    4,560
    
    
    
    668Others, net
    
    
    (15
    )
    
    
    (40
    )
    
    
    
    
    
    
    Net loss for the year
    
    
    (7,111
    )
    
    
    (53,918
    )
    
    
    (38,469
    )
    
    
    (5,636
    )
 F-44




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
 (Amounts expressed in thousands except share data)
 As of December 31, 2008 and 2009
 2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    US$ASSETSCURRENT ASSETSCash and cash equivalents
    
    
    1,289
    
    
    
    8,509
    
    
    
    1,246Due from subsidiaries
    
    
    136,407
    
    
    
    180,904
    
    
    
    26,498Prepaid expenses and other current assets
    
    
    1,236
    
    
    
    179
    
    
    
    26TOTAL CURRENT ASSETS
    
    
    138,932
    
    
    
    189,592
    
    
    
    27,770Property, plant and equipment, net
    
    
    594
    
    
    
    336
    
    
    
    49Prepayment for acquisition of property, plant and machinery
    
    
    4,525
    
    
    
    
    
    
    
    Other non-current asset
    
    
    
    
    
    
    20,602
    
    
    
    3,018Investment in subsidiaries
    
    
    (95,259
    )
    
    
    (102,180
    )
    
    
    (14,967
    )TOTAL ASSETS
    
    
    48,792
    
    
    
    108,350
    
    
    
    15,870LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccrued professional fees
    
    
    3,201
    
    
    
    3,713
    
    
    
    544Due to subsidiaries
    
    
    967
    
    
    
    1,669
    
    
    
    244Liabilities relating to warrants
    
    
    2,289
    
    
    
    3,003
    
    
    
    440Other
current liabilities and accrued expenses
    
    
    169
    
    
    
    2,328
    
    
    
    341TOTAL CURRENT LIABILITIES
    
    
    6,626
    
    
    
    10,713
    
    
    
    1,569TOTAL LIABILITIES
    
    
    6,626
    
    
    
    10,713
    
    
    
    1,569Contingencies and commitmentsSHAREHOLDERS EQUITYCommon stock, (US$0.01 par value; 4,000,000,000 authorized
in 2008 and 2009; shares issued and outstanding: 15,534,669 and 19,300,390 as of December 31, 2008 and
2009, respectively)
    
    
    1,205
    
    
    
    1,463
    
    
    
    214Preferred stock, (US$0.01 par value; 1,000,000,000 shares
authorized; shares issued and outstanding: 1,000,000 as of
December 31, 2008 and 2009)
    
    
    77
    
    
    
    77
    
    
    
    11Additional paid-in capital
    
    
    394,542
    
    
    
    482,265
    
    
    
    70,641Accumulated deficit
    
    
    (346,791
    )
    
    
    (384,299
    )
    
    
    (56,291
    )Accumulated other comprehensive loss
    
    
    (6,867
    )
    
    
    (1,869
    )
    
    
    (274
    )TOTAL SHAREHOLDERS EQUITY
    
    
    42,166
    
    
    
    97,637
    
    
    
    14,301TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    48,792
    
    
    
    108,350
    
    
    
    15,870
  F-45




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2007, 2008 and 2009
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred stock
    
    
    Common stock
    
    
    paid in
    
    
    Accumulated
    
    
    comprehensive
    
    
    shareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    deficit
    
    
    income (loss)
    
    
    equityRmb
    
    
    
    
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbBalance at January 1, 2007
    
    
    
    
    
    
    
    
    
    
    13,809,497
    
    
    
    1,078
    
    
    
    335,628
    
    
    
    (285,762
    )
    
    
    (368
    )
    
    
    50,576Issue of shares
    
    
    1,000,000
    
    
    
    77
    
    
    
    782,168
    
    
    
    60
    
    
    
    20,563
    
    
    
    
    
    
    
    
    
    
    
    20,700Shares issued upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    437,000
    
    
    
    32
    
    
    
    7,736
    
    
    
    
    
    
    
    
    
    
    
    7,768Issue of warrants during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,584
    
    
    
    
    
    
    
    
    
    
    
    4,584Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,204
    
    
    
    
    
    
    
    
    
    
    
    1,204Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,111
    )
    
    
    
    
    
    
    (7,111
    )Share of subsidiaries equity transactions:Net unrealized gain on available-for-
sale securities, net of Rmb1,325 tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,247
    
    
    
    6,247Reclassification adjustment upon disposal of
available-for-sale securities, net of tax provision of nil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84
    )
    
    
    (84
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,759
    )
    
    
    (3,759
    )Total comprehensive loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,707
    )Balance at December 31, 2007
    
    
    1,000,000
    
    
    
    77
    
    
    
    15,028,665
    
    
    
    1,170
    
    
    
    369,715
    
    
    
    (292,873
    )
    
    
    2,036
    
    
    
    80,125Issue of
common stock, warrants and options to investors (net of offering cost of Rmb682)
    
    
    
    
    
    
    
    
    
    
    498,338
    
    
    
    34
    
    
    
    7,809
    
    
    
    
    
    
    
    
    
    
    
    7,843Shares issued upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    16,666
    
    
    
    1
    
    
    
    357
    
    
    
    
    
    
    
    
    
    
    
    358Modification of warrants issued to non-employees in prior year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,364
    
    
    
    
    
    
    
    
    
    
    
    2,364Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,374
    
    
    
    
    
    
    
    
    
    
    
    6,374Contribution
by major shareholder - China Biotech
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,923
    
    
    
    
    
    
    
    
    
    
    
    7,923Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,918
    )
    
    
    
    
    
    
    (53,918
    )
 F-46




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2007, 2008 and 2009
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred stock
    
    
    Common stock
    
    
    paid in
    
    
    Accumulated
    
    
    comprehensive
    
    
    shareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    deficit
    
    
    income (loss)
    
    
    EquityRmb
    
    
    
    
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    RmbShare of subsidiaries equity transactions:Net unrealized gain on available-for-
sale securities, net of Rmb1,325 tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,247
    )
    
    
    (6,247
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,656
    )
    
    
    (2,656
    )Total comprehensive loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,821
    )Balance at December 31, 2008
    
    
    1,000,000
    
    
    
    77
    
    
    
    15,543,669
    
    
    
    1,205
    
    
    
    394,542
    
    
    
    (346,791
    )
    
    
    (6,867
    )
    
    
    42,166Effect of adoption of ASC 815-40-15 resulting from
reclassification of warrants and option rights (Note16)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,488
    )
    
    
    961
    
    
    
    
    
    
    
    (7,527
    )Balance at 1 January 2009
    
    
    1,000,000
    
    
    
    77
    
    
    
    15,543,669
    
    
    
    1,205
    
    
    
    386,054
    
    
    
    (345,830
    )
    
    
    (6,867
    )
    
    
    34,639Issue of shares upon exercise of option rights
    
    
    
    
    
    
    
    
    
    
    60,000
    
    
    
    4
    
    
    
    1,121
    
    
    
    
    
    
    
    
    
    
    
    1,125Shares issued upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    136,864
    
    
    
    10
    
    
    
    2,580
    
    
    
    
    
    
    
    
    
    
    
    2,590Issue of shares upon conversion of convertible note
    
    
    
    
    
    
    
    
    
    
    3,322,260
    
    
    
    228
    
    
    
    80,764
    
    
    
    
    
    
    
    
    
    
    
    80,992Issue of shares upon exercise of stock purchase warrant
    
    
    
    
    
    
    
    
    
    
    14,776
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Issue of shares upon exercise of Warrant B
    
    
    
    
    
    
    
    
    
    
    222,821
    
    
    
    15
    
    
    
    3,041
    
    
    
    
    
    
    
    
    
    
    
    3,056Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,706
    
    
    
    
    
    
    
    
    
    
    
    8,706Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,469
    )
    
    
    
    
    
    
    (38,469
    )Share of subsidiaries equity transactions:Net unrealized gain on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,228
    
    
    
    9,228Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,230
    )
    
    
    (4,230
    )Total comprehensive loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,471
    )Balance at December 31, 2009
    
    
    1,000,000
    
    
    
    77
    
    
    
    19,300,390
    
    
    
    1,463
    
    
    
    482,265
    
    
    
    (384,299
    )
    
    
    (1,869
    )
    
    
    97,637
  F-47




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##### Table of Contents



CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(Amounts expressed in thousands)
For the years ended December 31, 2007, 2008 and 2009
 2007
    
    
    2008
    
    
    2009
    
    
    2009Rmb
    
    
    Rmb
    
    
    Rmb
    
    
    US$Cash flows from operating activitiesNet loss
    
    
    (7,111
    )
    
    
    (53,918
    )
    
    
    (38,469
    )
    
    
    (5,636
    )Net cash used in operating activities
    
    
    (35,111
    )
    
    
    (13,810
    )
    
    
    (48,375
    )
    
    
    (7,085
    )Net cash used in investing activities
    
    
    (68
    )
    
    
    (4,784
    )
    
    
    (15,961
    )
    
    
    (2,338
    )Net cash generated from financing activities
    
    
    37,190
    
    
    
    17,177
    
    
    
    72,428
    
    
    
    10,609Effect of exchange rate changes on cash and cash equivalents
    
    
    (108
    )
    
    
    270
    
    
    
    (872
    )
    
    
    (128
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,903
    
    
    
    (1,147
    )
    
    
    7,220
    
    
    
    1,058Cash and cash equivalents at beginning of year
    
    
    533
    
    
    
    2,436
    
    
    
    1,289
    
    
    
    188Cash and cash equivalents at end of year
    
    
    2,436
    
    
    
    1,289
    
    
    
    8,509
    
    
    
    1,246Supplemental disclosure of cash flow informationIncome taxes paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Supplemental disclosure non-cash investing and financing activitiesIssue of shares in exchange for equity interest in Faster Group in 2007
    
    
    20,700
    
    
    
    Issue of warrants as offering costs for financing activities in 2008
    
    
    
    
    
    
    682
    
    
    
    54
    
    
    
    8Conversion of convertible note in 2009
    
    
    
    
    
    
    
    
    
    
    82,975
    
    
    
    12,154Purchase of property, plant and equipment funded through accrued expenses and
other current liabilities
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
  F-48