##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
 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
 Commission file number: 000-50984
 eLong, Inc.
 (Exact name of Registrant as specified in its charter)
 Cayman Islands  (Jurisdiction of incorporation or organization)
     (Address of principal executive offices)        (Name, Telephone and Facsimile number and Address of Company Contact Person)
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredAmerican Depositary Shares, each representing two 
ordinary shares, par value $0.01 per ordinary share
    
    The Nasdaq Global Market
 None
 None
 18,817,507 ordinary shares, par value US$0.01 per share;
28,550,704 high-vote ordinary shares, par value US$0.01 per share.
 Yes o No þ
 o þ
  þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  þ Board o Other o
 o o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART IItem 1: Identity of Directors, Senior Management and Advisers
    
    
    4Item 2: Offer Statistics and Expected Timetable
    
    
    4Item 3: Key Information
    
    
    4Item 4: Information on the Company
    
    
    20Item 4A: Unresolved Staff Comments
    
    
    31Item 5: Operating and Financial Review and Prospects
    
    
    31Item 6: Directors, Senior Management and Employees
    
    
    47Item 7: Major Shareholders and Related Party Transactions
    
    
    60Item 8: Financial Information
    
    
    70Item 9: The Offer and Listing
    
    
    70Item 10: Additional Information
    
    
    72Item 11: Quantitative and Qualitative Disclosure About Market Risk
    
    
    77Item 12: Description of Securities other than Equity Securities
    
    
    77PART IIItem 13: Defaults, Dividend Arrearages and Delinquencies
    
    
    78Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    78Item 15: Controls and Procedures
    
    
    79Item 16A: Audit Committee Financial Expert
    
    
    80Item 16B: Code of Ethics
    
    
    80Item 16C: Principal Accountant Fees and Services
    
    
    81Item 16D: Exemptions from the Listing Standards for Audit Committees
    
    
    81Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    81Item 16F: Changes in Registrants Certifying Accountant
    
    
    81Item 16G: Corporate Governance
    
    
    82PART IIIItem 17: Financial Statements
    
    
    82Item 18: Financial Statements
    
    
    82Item 19. Exhibits
    
    
    82Exhibit 4.38Exhibit 4.39Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 15.2Exhibit 15.3Exhibit 15.4
   - 2 -




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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
   - 3 -




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Item 3:
Key InformationRisk Factors Item 4: Information on the CompanyBusiness Item 5:
Operating and Financial Review and Prospects.
  
 PART I
 
 Item 1: Identity of Directors, Senior Management and Advisers.
  
 Item 2: Offer Statistics and Expected Timetable.
  
 Item 3: Key Information.
 Selected Financial Data
 Item 5: Operating and Financial Review and Prospects
  Exchange Rate Information
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SELECTED CONSOLIDATED FINANCIAL DATA
 eLong, Inc.Year ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands, except for per share data)Selected Consolidated Statements
of Operations DataNet revenues
    
    
    179,842
    
    
    
    249,841
    
    
    
    297,586
    
    
    
    327,313
    
    
    
    357,894
    
    
    
    52,432Gross profit
    
    
    139,395
    
    
    
    187,596
    
    
    
    215,089
    
    
    
    230,317
    
    
    
    250,959
    
    
    
    36,766Total operating expenses
    
    
    (185,624
    )
    
    
    (203,608
    )
    
    
    (229,678
    )
    
    
    (271,999
    )
    
    
    (239,712
    )
    
    
    (35,118
    )Income/(loss) from operations
    
    
    (46,229
    )
    
    
    (16,012
    )
    
    
    (14,589
    )
    
    
    (41,682
    )
    
    
    11,247
    
    
    
    1,648Income/(loss) from continuing operations
    
    
    (43,285
    )
    
    
    (444
    )
    
    
    (25,691
    )
    
    
    (76,593
    )
    
    
    19,903
    
    
    
    2,916Net income/(loss)
    
    
    (60,518
    )
    
    
    1,040
    
    
    
    (25,588
    )
    
    
    (76,593
    )
    
    
    19,903
    
    
    
    2,916Income/(loss) per share from continuing operations
    
    
    (0.87
    )
    
    
    (0.01
    )
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.06Total basic income/(loss) per share
    
    
    (1.22
    )
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.06Total diluted income/(loss) per share
    
    
    (1.22
    )
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.40
    
    
    
    0.06Income/(loss) per ADS from continuing operations
    
    
    (1.74
    )
    
    
    (0.02
    )
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    0.84
    
    
    
    0.12Total basic income/(loss) per ADS
    
    
    (2.44
    )
    
    
    0.04
    
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    0.84
    
    
    
    0.12Total diluted income/(loss) per ADS
    
    
    (2.44
    )
    
    
    0.04
    
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    0.80
    
    
    
    0.12
 eLong, Inc.As of December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected Consolidated Balance
Sheet DataCash and cash equivalents
    
    
    988,560
    
    
    
    1,199,323
    
    
    
    1,138,447
    
    
    
    321,541
    
    
    
    639,468
    
    
    
    93,683Working capital(1)
    
    
    1,013,590
    
    
    
    1,106,345
    
    
    
    1,079,590
    
    
    
    898,693
    
    
    
    938,834
    
    
    
    137,540Property and equipment, net
    
    
    33,306
    
    
    
    37,809
    
    
    
    43,962
    
    
    
    52,484
    
    
    
    44,005
    
    
    
    6,447Total assets
    
    
    1,188,421
    
    
    
    1,334,908
    
    
    
    1,331,668
    
    
    
    1,137,964
    
    
    
    1,183,950
    
    
    
    173,450Long-term
obligations
    
    
    2,287
    
    
    
    980
    
    
    
    
    
    
    
    477
    
    
    
    1,186
    
    
    
    174Accumulated deficit
    
    
    (103,097
    )
    
    
    (102,056
    )
    
    
    (127,644
    )
    
    
    (204,237
    )
    
    
    (184,334
    )
    
    
    (27,005
    )Shareholders equity
    
    
    1,088,330
    
    
    
    1,199,799
    
    
    
    1,184,611
    
    
    
    1,012,181
    
    
    
    1,043,500
    
    
    
    152,874
 (1)
    
    Represents the amount of total consolidated current assets less total consolidated current liabilities.  - 5 -




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eLong, Inc.Year ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected
Consolidated Cash
Flow DataNet cash provided
by (used in)
operating
activities
    
    
    30,478
    
    
    
    76,554
    
    
    
    42,349
    
    
    
    (14,076
    )
    
    
    69,014
    
    
    
    10,111Net cash provided
by (used in)
investing
activities
    
    
    (32,813
    )
    
    
    72,985
    
    
    
    (43,638
    )
    
    
    (641,501
    )
    
    
    248,306
    
    
    
    36,377Net cash provided
by (used in)
financing
activities
    
    
    404,058
    
    
    
    95,140
    
    
    
    7,355
    
    
    
    (98,331
    )
    
    
    948
    
    
    
    139
 Exchange Rate Information
 Item 3: Key InformationRisk FactorsRisks Related to Doing Business in
the Peoples Republic of ChinaFluctuation in the value of the Renminbi may materially and
adversely affect our financial results and the value of our company
and ADSs Item 3:
Key InformationRisk FactorsRisks Related to Doing Business in the Peoples Republic of
ChinaGovernmental control of currency conversion may affect our ability to pay dividends and the
value of our ADSs.
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Average Exchange Rates of Renminbi per U.S. Dollar
 AverageYear ended December 31, 2005
    
    
    8.1826Year ended December 31, 2006
    
    
    7.9579Year ended December 31, 2007
    
    
    7.5806Year ended December 31, 2008
    
    
    6.9193Year ended December 31, 2009
    
    
    6.8295
  Recent Exchange Rates of Renminbi per U.S. Dollar
 High
    
    
    LowOctober 2009
    
    
    6.8292
    
    
    
    6.8248November 2009
    
    
    6.8300
    
    
    
    6.8255December 2009
    
    
    6.8299
    
    
    
    6.8244January 2010
    
    
    6.8295
    
    
    
    6.8258February 2010
    
    
    6.8330
    
    
    
    6.8258March 2010
    
    
    6.8270
    
    
    
    6.8254
 Risk Factors
 You should carefully consider each of the following risks and uncertainties associated with
our company and the ownership of our securities. You should pay particular attention to the fact
that we conduct substantially all of our operations in China and are governed by a legal and
regulatory environment that differs significantly from that of the United States. Additional risks
not currently known to us or that we currently deem immaterial may also have an adverse impact on
our business operations.
 Risks Related to Our Business
 We have sustained losses in the past and cannot assure you that we will be profitable in the future.
  A slow-down of, or increased volatility in, economic growth in China may adversely affect our
growth and profitability.
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Declines or disruptions in the travel industry may reduce our revenues.
  
    
    outbreaks, or the fear of outbreaks, of H1N1 flu (swine flu), severe acute
respiratory syndrome, avian flu or other diseases;
    
    travel-related accidents;
    
    unseasonable or extreme weather;
    
    natural disasters;
    
    increased prices or fees in the hotel, airline or other travel-related sectors;
    
    threats of war or threats or incidents of terrorism;
    
    general economic downturns.
  We may not be able to compete successfully against our current or future competitors.
  We are dependent on our ability to establish and maintain favorable arrangements with our travel
suppliers, internet search engines and distribution partners.
   - 8 -




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www.google.cn www.google.com.hk
  Our business may be harmed if we fail to strengthen our brand and provide high quality service to
our customers and business partners.
  Substantial uncertainties exist with respect to the interpretation and application of PRC laws and
regulations restricting foreign investment in the air ticketing, travel agency and Internet content
provision businesses as well as other laws affecting our ownership structure and business
operations.
   - 9 -




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
    
    levying fines or confiscating our income or the income of our affiliated Chinese entities;
    
    revoking our business licenses or the business licenses of our affiliated Chinese entities;
    
    requiring us and/or our affiliated Chinese entities to restructure our ownership structure
or operations; and
    
    requiring that we and/or our affiliated Chinese entities discontinue any or all portions
of our Internet content provision, air ticketing or travel agency businesses.
  Our operations may be materially and adversely affected if we or any of our affiliated Chinese
entities fails to obtain or maintain all relevant permits and approvals in the heavily regulated
air ticketing, travel agency, and Internet industries.
  We are controlled by Expedia and conflicts of interest may arise between Expedia and us.
   We depend on our senior executives and other employees, and our business may be severely disrupted
if we lose their services.
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We may not use our cash, cash equivalents, restricted cash and short-term investments effectively.
  We may not be able to successfully execute future acquisitions, alliances or affiliations or to
efficiently manage any acquired businesses.
  Our results may fluctuate due to seasonality in the travel industry in China.
  Our business depends on the technology infrastructure and service of third parties.
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Our business is subject to risks associated with protection of confidential data, online payments
and credit card fraud.
   We do not have comprehensive off-site backup systems or business insurance.
   Our commission revenues may decrease if our hotel suppliers fail to accurately report data
concerning our customer hotel stays.
  We may become involved in litigation regarding our intellectual property rights or our website
contents.
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Our contractual arrangements with our consolidated affiliated Chinese entities may result in
adverse tax consequences to us.
  If our affiliated Chinese entities violate their contractual agreements with us, our business could
be harmed, and we may have to resort to litigation to enforce our rights, which could be
time-consuming and ineffective.
  We may be unable to collect long-term loans to the shareholders of our consolidated affiliated
entities in China.
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Risks Related to Doing Business in the Peoples Republic of China
 We would be adversely affected by the
cancellation, modification or
discontinuation of any preferential tax treatments currently
available to us.
     - 14 -




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Fluctuation in the value of the Renminbi may materially and adversely affect our financial results
and the value of our company and ADSs.
   Uncertainties and restrictions in the PRC legal system may have a material and adverse impact on
our business and financial condition.
  We may be required to withhold PRC income tax on any dividends we pay you (if any), and any gain
you realize on the transfer of ADSs or ordinary shares may also be subject to PRC withholding tax.
   - 15 -




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Governmental control of currency conversion may affect our ability to pay dividends and the value
of our ADSs.
  PRC regulations may limit our ability to transfer our funds held overseas into China.
  Our subsidiaries and affiliated entities in China are subject to restrictions on paying dividends
or making other payments to us, which may decrease our primary internal source of funds.
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Our online business relies on the telecommunications infrastructure of Chinas Internet.
 e.g.
 Risks Related to Ownership of Our ADSs or Ordinary Shares and Our Trading Market
 Failure to maintain effective internal controls could have a material and adverse effect on the
trading price of our ADSs.
 Item 15. Control and Procedures
 The market price for our ADSs is volatile.
  
    
    actual or anticipated fluctuations in our quarterly or annual financial or operating results;
    
    changes in financial estimates and evaluations by securities analysts;
    
    general market and index trends in the Nasdaq stock market;
    
    changes in the economic performance or market valuations of
other travel, Internet, e-commerce or publicly listed companies with  operations in China;
    
    announcements by us or our competitors of new services, acquisitions, strategic
partnerships, joint ventures or capital commitments;
    
    additions or departures of key personnel;
    
    sales or repurchases of additional ordinary shares or ADSs by us, our major shareholders or
our senior management; and
    
    potential or actual litigation.
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Future sales by our existing shareholders of a substantial number of our ordinary shares or ADSs
could adversely affect the price of our ADSs.
 Item 7: Major Shareholders
and Related Party Transactions  Major Shareholders.
 We believe we are likely to be a passive foreign investment company for the 2009 calendar year and
may be a passive foreign investment company for future years, which would result in adverse U.S.
federal income tax consequences to U.S. holders of our ADSs.
 Item 10: Additional InformationTaxationUnited
States Federal Income TaxationPassive foreign investment company rules
 You may be subject to limitations on transfer of your ADSs or the exercise of your voting rights as
an ADS holder.
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We currently follow home country practice in lieu of complying with certain requirements of the
Nasdaq Listing Rules. This may afford less protection to holders of our ordinary shares and ADSs.
  You may not receive distributions on ordinary shares (if any) or any value for them if it is
illegal or impractical to make them available to you.
  You may face difficulties in protecting your interests, and your ability to protect your rights
through courts in the U.S. may be limited, because we are incorporated under Cayman Islands law,
conduct substantially all of our operations in China and all of our senior executive officers
reside outside the United States.
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Item 4: Information on the Company.
 4A: History and Development of the Company
   Item 7: Major Shareholders and Related Party TransactionsMajor Shareholders.
  Acquisitions and Dispositions
 Item 3: Key
InformationRisk FactorsWe may not be able to successfully execute future acquisitions,
alliances or affiliations or to efficiently manage any acquired businesses
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Capital Expenditures
 Item 5: Operating and Financial Review and ProspectsLiquidity and Capital Resources
 4B: Business Overview
   Our Services
  Hotel reservations
  - 21 -




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Air
ticketing
   Non-travel services
 Item 5: Operating and
Financial Review and ProspectsPrincipal Factors Affecting Our Results of Operations
  - 22 -




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Supplier Relationship Management and Distribution
  Call center
 Websites http://www.eLong.com http://www.eLong.net
 Telephone booking services.
 Reseller network
 Marketing and Brand Promotion
  Advertising Item 3: Key Information Risk Factors
We are dependent on our ability to establish and maintain favorable arrangements with our travel
suppliers, internet search engines and distribution partners
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Co-marketing relationships
 eLong membership program
 Direct marketing
 Corporate social responsibility
 Competition
 Item 3: Key
InformationRisk FactorsRisks Related to Our BusinessWe may not be able to compete
successfully against our current or future competitors.
 Intellectual Property
  www.eLong.com, www.eLong.net www.eLong.cn www.xici.net
  - 24 -




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Seasonality
 Item 5: Operating and Financial Review and ProspectsMajor Factors Affecting the Travel
IndustrySeasonality in the travel service industry Item 3: Key InformationRisk
FactorsRisks Relating to Our BusinessOur quarterly results are likely to fluctuate because of
seasonality in the travel industry in China 
 Governmental Regulation
 Regulatory Authorities
  
    
    the State Administration for Industry and Commerce (the SAIC);
    
    the Ministry of Commerce (the MOFCOM);
    
    the Ministry of Public Security (the MPS);
    
    the Civil Aviation Administration of China (the CAAC); and
    
    the China National Tourism Administration (the CNTA); and
    
    the Beijing Communications Administration (the BCA).
 Scope of Regulation
 4C: Organizational Structure
   Internet Information Services
 Measures for the Administration of Internet Information Services (2000)
  - 25 -




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Information Security and Censorship
  
    
    The Law of the Peoples Republic of China on the Preservation of State Secrets(1988) and
its Implementing Rules (1990);
    
    The Law of the Peoples Republic of China Regarding State Security(1993) and its
Implementing Rules (1994);
    
    Rules of the Peoples Republic of China for Protecting the Security of Computer
Information Systems(1994);
    
    Notice Concerning Work Relating to the Filing of Computer Information Systems with
International Connections(1996);
    
    Administrative Regulations for the Protection of Secrecy on Computer Information Systems
Connected to International Networks(1999);
    
    Regulations for the Protection of State Secrets for Computer Information Systems on the
Internet(2000);
    
    Notice issued by the Ministry of Public Security of the Peoples Republic of China
Regarding Issues Relating to the Implementation of the Administrative Measure for the
Security Protection of International Connections to Computer Information Networks(2000);
    
    The Decision of the Standing Committee of the National Peoples Congress Regarding the
Safeguarding of Internet Security(2000); and
    
    Measures for the Administration of Commercial Website Filings for the Record(2002) and
their Implementing Rules (2002); and
    
    Measures for the Administration of Protecting Security Communications and Networks(2009).
 Administrative Rules on the Filing of Commercial
Websites
 
    
    register with the Beijing AIC and obtain electronic registration marks;
    
    place the registration marks on their websites homepages; and
    
    register website names with the Beijing AIC.
  Consumer Data Protection & Privacy
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Air ticketing
 Rules Concerning the Affirmation for the
Qualification of Aviation Transportation Sales Agencies.
 Foreign Investment Industrial Guidance Catalogue Second Supplementary Regulations regarding
Foreign Investment in Civil Aviation Transportation Industry
 Circular on Change in the Management of Domestic Aviation
Service Fare
 Travel Agency
 Regulation on Travel Agencies Administration of Travel Agencies
Regulations Implementing Rules for the Regulation on Travel Agencies
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Implementing Rules for Regulation on the Administration of Travel Agencies
 Regulation of Foreign Currency Exchange and Dividend Distribution
 Foreign currency exchange.
 Item 3: Key InformationRisk FactorsRisks Related to Doing Business in ChinaGovernmental
control of currency conversion may affect our ability to pay dividends and the value of our ADSs Item 3: Key InformationRisk FactorsRisks Related to Doing Business in ChinaPRC
regulations may limit our ability to transfer our funds held overseas into China
  Dividend distribution.
 
    
    the Sino-foreign Equity Joint Venture Law (2001);
    
    the Regulations of Implementation of the Sino-foreign Equity Joint Venture Law (2001);
    
    the Foreign Investment Enterprise Law (2000); and
    
    the Regulations of Implementation of the Foreign Investment Enterprise Law (2001).
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Implementation Rules for the CIT Law
 Notice on Issues Regarding
Recognition of Overseas Incorporated Enterprises Controlled by PRC Domestic Enterprises as PRC
Resident Enterprises Based on the De Facto Management Body Criteria
 Item 3: Key Information About the Company: Risk FactorsRisks
Related to Doing Business in ChinaWe would be adversely affected by the cancellation, modification or discontinuation of any
preferential tax treatments currently available to us in the PRC.
  - 29 -




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Labor Law
 Employment Contract Law of the PRC
 Tort Law
 Tort Liability Law of the
Peoples Republic of China
 4C: Organizational Structure
      - 30 -




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4D: Property and Equipment
  
 Item 4A: Unresolved Staff Comments.
  
 Item 5: Operating and Financial Review and Prospects.
 You should read the following discussion of our financial condition and results of operations
in conjunction with our consolidated financial statements and the related notes and other
financial information included elsewhere in this annual report. This discussion contains
forward-looking statements. See Special Note Regarding Forward Looking Statements at the
beginning of this annual report. We caution you that our business and financial performance are
subject to substantial risks and uncertainties. In evaluating our business, you should carefully
consider the information provided under Item 3: Key InformationRisk Factors in this annual
report.
 OVERVIEW
  Major Factors Affecting the Travel Industry
  Condition
of the overall economy
 Seasonality
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Disruptions.
 
    
    outbreaks, or the fear of outbreaks, of H1N1 flu (swine flu), severe acute
respiratory syndrome, avian flu or other diseases;
    
    travel-related accidents;
    
    unseasonable or extreme weather;
    
    natural disasters;
    
    increased prices or fees in the hotel, airline or other
travel-related sectors;
    
    threats of war or threats or incidents of terrorism; and
    
    general economic downturns.
  OPERATING RESULTS
 Principal Factors Affecting Our Results of Operations
 Revenues
  Year ended December 31,2007
    
    
    2008
    
    
    2009RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in thousands, except for percentage data)RevenuesHotel commissions(1)
    
    
    240,803
    
    
    
    76
    %
    
    
    253,458
    
    
    
    73
    %
    
    
    256,830
    
    
    
    37,626
    
    
    
    68
    %Air ticketing commissions(2)
    
    
    57,456
    
    
    
    18
    %
    
    
    77,205
    
    
    
    22
    %
    
    
    96,036
    
    
    
    14,069
    
    
    
    25
    %Other travel revenue(3)
    
    
    5,588
    
    
    
    2
    %
    
    
    1,284
    
    
    
    0
    %
    
    
    2,697
    
    
    
    395
    
    
    
    1
    %Total travel revenue
    
    
    303,847
    
    
    
    96
    %
    
    
    331,947
    
    
    
    95
    %
    
    
    355,563
    
    
    
    52,090
    
    
    
    94
    %Non travel revenue(4)
    
    
    11,550
    
    
    
    4
    %
    
    
    16,479
    
    
    
    5
    %
    
    
    23,969
    
    
    
    3,512
    
    
    
    6
    %Total Revenues
    
    
    315,397
    
    
    
    100
    %
    
    
    348,426
    
    
    
    100
    %
    
    
    379,532
    
    
    
    55,602
    
    
    
    100
    %
 (1)
    
    Revenues from our hotel reservation services are determined by the number of room nights we book
and the commissions we earn. Generally, our customers pay the hotels directly, and we collect our
commissions based on the number of room nights our customers stay. Our commission from hotel
reservation services is recognized after hotel customers have completed their hotel stay, based on our
confirmation with the hotel of the customers stay. Because we act as an agent in transactions with no
risk of losses due to obligations for cancelled visits, we recognize our revenues from hotel
transactions on a net basis in our statements of operations.  - 32 -




---



##### Table of Contents



(2)
    
    Revenues derived from our air ticketing service represent the second largest component of our
travel-related revenues. We conduct our air ticketing business through contractual arrangements with
our affiliated Chinese entities as well as local agents for the issuance and delivery of air tickets
and collection of air ticketing fares. Commissions from air ticketing services are recognized upon the
delivery of the ticket to the customer, net of estimated cancellations. In some instances, airlines
provide discretionary commissions if we achieve performance targets. Such commissions are recognized on
a cash basis because we cannot reasonably estimate them.(3)
    
    Other travel revenue for 2008 and 2009 consists primarily of commission revenue from the sale of
travel insurance sold with our air tickets. We recognize this revenue when the travel insurance is
issued for the customer, net of cancellations. Other travel revenue for 2007 primarily includes revenue
sharing with Travelscape and vacation packages revenue. The vacation packages business was suspended in
July 2007.(4)
    
    Non travel revenue for 2007, 2008 and 2009 primarily includes advertising revenue from Beijing Xici.   Cost of services
 Operating expenses
    - 33 -




---



##### Table of Contents



Income tax.
    - 34 -




---



##### Table of Contents



Critical Accounting Policies
   
    
    the selection of critical accounting policies; and
    
    the judgments and other uncertainties affecting the application of those critical accounting policies.
  Depreciation.
 Impairment of long-lived assets.
 Impairment of goodwill and certain intangible assets.
  - 35 -




---



##### Table of Contents



Provision for doubtful accounts.
 Deferred income tax
 Business
Combinations Business Combinations Business
Combinations: Overall Business
Combinations
 Provision for loyalty points.
  - 36 -




---



##### Table of Contents



eCoupons.
 Share-based compensation. Compensation-Stock
Compensation: Overall Share-Based
Payment
 Equity: Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services)
 Revenue recognition.
   - 37 -




---



##### Table of Contents



Revenue Recognition: Overall Revenue Recognition in
Financial Statements Revenue Recognition:
Principal Agent Considerations Reporting
Revenue Gross as a Principal Versus Net as an Agent
 Results of Operations
  Year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues:Travel
    
    
    303,846,548
    
    
    
    331,947,035
    
    
    
    355,562,669
    
    
    
    52,090,225Other
    
    
    11,550,123
    
    
    
    16,478,511
    
    
    
    23,969,363
    
    
    
    3,511,532Total revenues
    
    
    315,396,671
    
    
    
    348,425,546
    
    
    
    379,532,032
    
    
    
    55,601,757Business tax and surcharges
    
    
    17,810,292
    
    
    
    21,112,717
    
    
    
    21,638,510
    
    
    
    3,170,060Net revenues
    
    
    297,586,379
    
    
    
    327,312,829
    
    
    
    357,893,522
    
    
    
    52,431,697Cost of services
    
    
    82,497,585
    
    
    
    96,996,309
    
    
    
    106,934,784
    
    
    
    15,666,034Gross profit
    
    
    215,088,794
    
    
    
    230,316,520
    
    
    
    250,958,738
    
    
    
    36,765,663Operating expenses:Service development
    
    
    48,602,279
    
    
    
    52,584,041
    
    
    
    58,121,508
    
    
    
    8,514,849Sales and marketing
    
    
    126,971,094
    
    
    
    163,528,250
    
    
    
    133,195,446
    
    
    
    19,513,243General and administrative
    
    
    52,005,466
    
    
    
    53,652,427
    
    
    
    47,670,045
    
    
    
    6,983,701Amortization of intangible assets
    
    
    1,060,000
    
    
    
    848,906
    
    
    
    653,439
    
    
    
    95,729Charges related to property and equipment
and intangible assets
    
    
    1,038,896
    
    
    
    1,384,814
    
    
    
    71,635
    
    
    
    10,495(Loss)/ income from operations
    
    
    (14,588,941
    )
    
    
    (41,681,918
    )
    
    
    11,246,665
    
    
    
    1,647,646Other income (expenses):Interest income
    
    
    55,470,781
    
    
    
    29,020,353
    
    
    
    12,880,473
    
    
    
    1,887,000Foreign exchange loss
    
    
    (65,819,578
    )
    
    
    (60,937,889
    )
    
    
    (431,856
    )
    
    
    (63,267
    )Other
    
    
    131,630
    
    
    
    
    
    
    
    (11,608
    )
    
    
    (1,701
    )Total other (expenses)/income, net
    
    
    (10,217,167
    )
    
    
    (31,917,536
    )
    
    
    12,437,009
    
    
    
    1,822,032(Loss)/income  from continuing
operations before income tax expense
    
    
    (24,806,108
    )
    
    
    (73,599,454
    )
    
    
    23,683,674
    
    
    
    3,469,678Income tax expense
    
    
    885,343
    
    
    
    2,993,678
    
    
    
    3,780,585
    
    
    
    553,859(Loss)/income from continuing operations
    
    
    (25,691,451
    )
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    2,915,819Income from discontinued operations before
income tax expense
    
    
    112,260
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense of discontinued operations
    
    
    8,420
    
    
    
    
    
    
    
    
    
    
    
    Total income from discontinued operations,
net of tax
    
    
    103,840
    
    
    
    
    
    
    
    
    
    
    
    Net (loss)/income
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    2,915,819
  - 38 -




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##### Table of Contents



2009 Compared to 2008
 Revenues
 Year ended December 31,2008
    
    
    2009% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    US$
    
    
    revenues
    
    
    growth(in thousands, except percentage data)RevenuesHotel commissions
    
    
    253,458
    
    
    
    73
    %
    
    
    256,830
    
    
    
    37,626
    
    
    
    68
    %
    
    
    1
    %Air ticketing commissions
    
    
    77,205
    
    
    
    22
    %
    
    
    96,036
    
    
    
    14,069
    
    
    
    25
    %
    
    
    24
    %Other travel revenue
    
    
    1,284
    
    
    
    0
    %
    
    
    2,697
    
    
    
    395
    
    
    
    1
    %
    
    
    110
    %Total travel revenue
    
    
    331,947
    
    
    
    95
    %
    
    
    355,563
    
    
    
    52,090
    
    
    
    94
    %
    
    
    7
    %Non travel revenue
    
    
    16,479
    
    
    
    5
    %
    
    
    23,969
    
    
    
    3,512
    
    
    
    6
    %
    
    
    45
    %Total revenues
    
    
    348,426
    
    
    
    100
    %
    
    
    379,532
    
    
    
    55,602
    
    
    
    100
    %
    
    
    9
    %
  Year ended December 31,%2008
    
    
    2009
    
    
    growthNumber of room nights booked (000s)
    
    
    3,945
    
    
    
    4,316
    
    
    
    9
    %Average commission per room night (RMB)
    
    
    64
    
    
    
    60
    
    
    
    (6
    %)Number of air tickets sold (000s)
    
    
    1,788
    
    
    
    2,205
    
    
    
    23
    %Average commission per air ticket (RMB)
    
    
    43
    
    
    
    44
    
    
    
    2
    %
  - 39 -




---



##### Table of Contents



Hotel
 Reservations.
 Air ticketing.
 Other travel revenues
 Business tax and surcharges
 Cost of services and gross profit
 Operating expenses
 Year ended December 31,2008
    
    
    2009% of net
    
    
    
    
    
    
    
    
    
    
    % of net
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    US$
    
    
    revenues
    
    
    growth(in thousands, except for percentage data)Operating expensesService development
    
    
    52,584
    
    
    
    16
    %
    
    
    58,122
    
    
    
    8,515
    
    
    
    16
    %
    
    
    11
    %Sales and marketing
    
    
    163,528
    
    
    
    50
    %
    
    
    133,195
    
    
    
    19,513
    
    
    
    37
    %
    
    
    (19
    %)General and administrative
    
    
    53,653
    
    
    
    16
    %
    
    
    47,670
    
    
    
    6,984
    
    
    
    13
    %
    
    
    (11
    %)Amortization of intangible assets
    
    
    849
    
    
    
    
    
    
    
    653
    
    
    
    96
    
    
    
    
    
    
    
    (23
    %)Changes related to property and
equipment and intangible assets
    
    
    1,385
    
    
    
    1
    %
    
    
    72
    
    
    
    10
    
    
    
    
    
    
    
    (95
    %)Total operating expenses
    
    
    271,999
    
    
    
    83
    %
    
    
    239,712
    
    
    
    35,118
    
    
    
    67
    %
    
    
    (12
    %)
  - 40 -




---



##### Table of Contents



Service development.
 Sales and marketing.
 General and administrative.
 Other income (expenses), net.
 Income tax expense.
 Net income
 2008 Compared to 2007
 Revenues
 Year ended December 31,2007
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    revenues
    
    
    growth(in thousands, except percentage data)RevenuesHotel commissions
    
    
    240,803
    
    
    
    76
    %
    
    
    253,458
    
    
    
    73
    %
    
    
    5
    %Air ticketing commissions
    
    
    57,456
    
    
    
    18
    %
    
    
    77,205
    
    
    
    22
    %
    
    
    34
    %Other travel revenue
    
    
    5,588
    
    
    
    2
    %
    
    
    1,284
    
    
    
    0
    %
    
    
    (77
    %)Total travel revenue
    
    
    303,847
    
    
    
    96
    %
    
    
    331,947
    
    
    
    95
    %
    
    
    9
    %Non travel revenue
    
    
    11,550
    
    
    
    4
    %
    
    
    16,479
    
    
    
    5
    %
    
    
    43
    %Total revenues
    
    
    315,397
    
    
    
    100
    %
    
    
    348,426
    
    
    
    100
    %
    
    
    10
    %
  - 41 -




---



##### Table of Contents



Year ended December 31,%2007
    
    
    2008
    
    
    growthNumber of room nights booked (000s)
    
    
    3,711
    
    
    
    3,945
    
    
    
    6
    %Average commission per room night (RMB)
    
    
    65
    
    
    
    64
    
    
    
    (1
    %)Number of air tickets sold (000s)
    
    
    1,416
    
    
    
    1,788
    
    
    
    26
    %Average commission per air ticket (RMB)
    
    
    41
    
    
    
    43
    
    
    
    5
    %
  Hotel
 Reservations.
 Air ticketing.
 Other travel revenues
  Business tax and surcharges.
 Cost of services and gross profit
  - 42 -




---



##### Table of Contents



Operating expenses
 Year ended December 31,2007
    
    
    2008% of net
    
    
    
    
    
    
    % of net
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    revenues
    
    
    growth(in thousands, except for percentage data)Operating expensesService development
    
    
    48,602
    
    
    
    16
    %
    
    
    52,584
    
    
    
    16
    %
    
    
    8
    %Sales and marketing
    
    
    126,971
    
    
    
    43
    %
    
    
    163,528
    
    
    
    50
    %
    
    
    29
    %General and administrative
    
    
    52,006
    
    
    
    18
    %
    
    
    53,653
    
    
    
    16
    %
    
    
    3
    %Amortization of intangible assets
    
    
    1,060
    
    
    
    
    
    
    
    849
    
    
    
    
    
    
    
    (20
    %)Changes related to property and
equipment and intangible assets
    
    
    1,039
    
    
    
    
    
    
    
    1,385
    
    
    
    1
    %
    
    
    33
    %Total operating expenses
    
    
    229,678
    
    
    
    77
    %
    
    
    271,999
    
    
    
    83
    %
    
    
    18
    %
  Service development.
 Sales and marketing.
 General and administrative.
 Other income (loss), net.
 Income tax expense.
 Net loss
  - 43 -




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Liquidity
   Year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Net cash provided by (used in) operating activities
    
    
    42,349
    
    
    
    (14,076
    )
    
    
    69,014
    
    
    
    10,111Net cash provided by (used in) investing activities
    
    
    (43,638
    )
    
    
    (641,501
    )
    
    
    248,306
    
    
    
    36,377Net cash provided by (used in) financing activities
    
    
    7,355
    
    
    
    (98,331
    )
    
    
    948
    
    
    
    139Effect of foreign exchange rate changes on cash
    
    
    (66,943
    )
    
    
    (62,997
    )
    
    
    (341
    )
    
    
    (50
    )Net increase (decrease) in cash and cash equivalents
    
    
    (60,876
    )
    
    
    (816,905
    )
    
    
    317,927
    
    
    
    46,577Cash and cash equivalents at beginning of year
    
    
    1,199,323
    
    
    
    1,138,446
    
    
    
    321,541
    
    
    
    47,106Cash and cash equivalents at end of year
    
    
    1,138,447
    
    
    
    321,541
    
    
    
    639,468
    
    
    
    93,683
 Operating activities
 Investing activities
  - 44 -




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##### Table of Contents



Financing activities
  Capital Resources
 Item 3: Key
InformationRisk Factors
 TREND INFORMATION
  OFF-BALANCE SHEET ARRANGEMENTS
  CONTRACTUAL OBLIGATIONS
  (in RMB millions)
    
    Total
Payments due
    
    
    Less than
1 year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than
5 yearsOperating Lease Obligations(1)
    
    
    30.5
    
    
    
    10.9
    
    
    
    19.6
    
    
    
    
    
    
    
    Purchase Obligations(2)
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    
    
    
    
    Total
    
    
    30.8
    
    
    11.1
    
    
    19.7
    
    
    
    
    
    
    
 (1)
    
    Includes future minimum lease payments
under non-cancelable operating leases,
including lease payments on our branch
offices, with initial or remaining lease
terms in excess of one year as of December
31, 2009. For our headquarters in Beijing,
the total leased space under contract is
approximately 10,000 square meters. The
annual payment under the lease is RMB9.9
million (US$1.5 million), subject to an
increase beginning in October 2012.
Lease contract
terms for our other offices vary from one to
three years, and the total leased space
under the agreements is 2,600 square meters.
The annual payment under the leases is
RMB2.4 million (US$0.4 million).(2)
    
    We have outstanding purchase obligations
totaling RMB0.3 million, which are primarily
related to contracts for provision of
services at airports and railway stations.
We accrue the relevant amounts once the
services are rendered by our service
providers. The above table indicates our
contractual obligations as of December 31,
2009, the actual payment amounts may differ
as agreements are renegotiated, cancelled or
terminated.
In April
2010, we extended the term of the expiry of
the lease from 2012 to 2015.  - 45 -




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##### Table of Contents



INFLATION AND MONETARY RISK
 Item 3: Key information on the CompanyRisk FactorsRisk related to Doing
Business in the Peoples Republic of ChinaA slow-down of, or increased volatility in, economic
growth in China may adversely affect our growth and profitability
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest rate risk
    - 46 -




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##### Table of Contents



2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009(-30%)
    
    
    (-15%)
    
    
    Actual
    
    
    (15%)
    
    
    (30%)RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB0002009 interest income
    
    
    9,016
    
    
    
    10,948
    
    
    
    12,880
    
    
    
    14,812
    
    
    
    16,744
 Foreign exchange risk
  2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009(-10%)
    
    
    (-5%)
    
    
    Actual
    
    
    (5%)
    
    
    (10%)RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB0002009 foreign exchange gain/(loss)
    
    
    (48,000
    )
    
    
    (24,000
    )
    
    
    (432
    )
    
    
    24,000
    
    
    
    48,000
 Item 3: Key InformationRisk FactorsRisks Related to Doing Business in the Peoples Republic of
ChinaFluctuation of the Renminbi may materially and adversely affect our financial results and
the value of our company and ADSs Item 3: Key InformationRisk FactorsRisks Related to Our
BusinessWe may not use our cash, cash equivalents, restricted cash and short-term investments
effectively.
 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Note (2) Summary of
Significant Accounting Policies(y) Recently issued accounting pronouncements
 
 Item 6: Directors, Senior Management and Employees.
 Directors and Senior Management
   - 47 -




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##### Table of Contents



Item 7: Major Shareholders and
Related Party Transactions  Major Shareholders
   Name
    
    Age
    
    PositionGuangfu Cui
    
    
    41
    
    
    Chief Executive OfficerMike Doyle
    
    
    40
    
    
    Chief Financial OfficerSami Farhad
    
    
    37
    
    
    Vice President & General CounselJames Li
    
    
    36
    
    
    Vice President of SalesKenneth Liao
    
    
    48
    
    
    Vice President & Chief Technology OfficerJack Wang
    
    
    36
    
    
    Vice President of Partner Service GroupJason Xie
    
    
    33
    
    
    Vice President of Business DevelopmentWei Xue
    
    
    47
    
    
    Vice President of Air BusinessYu Zheng
    
    
    36
    
    
    Vice President of Marketing & Operations
 Name
    
    Age
    
    PositionHenrik Kjellberg(1)(3)
    
    
    39
    
    
    Chairman of the Board of DirectorsLily Cheng(1)
    
    
    31
    
    
    DirectorFernando Gil de
Bernabé(2)
    
    
    45
    
    
    DirectorThomas Gurnee(2)(3)
    
    
    59
    
    
    DirectorJens Parkitny(1) (3)
    
    
    44
    
    
    DirectorCyril Ranque(1)
    
    
    40
    
    
    DirectorMichael Scown(2)
    
    
    51
    
    
    DirectorJohan Svanstrom(1)
    
    
    38
    
    
    DirectorJustin Tang
    
    
    39
    
    
    Director
 (1)
    
    Nominated by Expedia Asia Pacific. Mr. Kjellberg is the Chairman of the Board of Directors.(2)
    
    Member of the Audit Committee of our Board of Directors. Mr. Gurnee is the Chairman of the
Audit Committee.(3)
    
    Member of the Compensation Committee of our Board of Directors. Mr. Kjellberg is Chairman
of the Compensation Committee.  - 48 -




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##### Table of Contents



Biographical Information
 Executive Officers
            - 49 -




---



##### Table of Contents



Directors
   - 50 -




---



##### Table of Contents



- 51 -




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- 52 -




---



##### Table of Contents



Board Practices
 Employment
Agreements with Executive Officers
 Committees of the Board of Directors   Audit Committee
 Item 16A: Audit Committee Financial
Expert, Item 16C: Principal Accountant Fees and Services.
 Compensation Committee
   Duties of Directors
  Limitation on Liability and Other Indemnification Matters
   - 53 -




---



##### Table of Contents



Compensation of Senior Management and Directors
 Compensation Arrangements with Directors.
  Compensation Arrangements with Senior Executive Officers.
 Share Ownership.
 Employment Agreements with Executive Officers
 Employment agreement with Guangfu Cui Non-Competition Agreements with Our Senior Executive Officers Equity Compensation Plan and Grants2009 Plan.
 Employment agreements with other senior executive officers. Compensation Arrangements with Executive Officers
  - 54 -




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##### Table of Contents



Non-competition agreements with our senior executive officers
 Separation agreement.
 Share Ownership
 Item 7: Major Shareholders and Related Party Transactions Share-Based Compensation Plans and Options Grants
 Equity Compensation Plans and Grants
  2001 Plan
   - 55 -




---



##### Table of Contents



Option Grantee
    

Ordinary
shares underlying options granted and outstanding
    
    

Exercise
price(US$)
    
    
    Date of grantJustin Tang
    
    
    2,750,000
    (1)
    
    
    0.50
    
    
    April 18, 2001156,250
    (1)
    
    
    1.53
    
    
    September 1, 2003Other employees
    
    
    69,866
    (2)
    
    
    1.53
    
    
    January 1, 2004Total
    
    
    2,976,116
 (1)
    
    Options were originally granted to Justin Tang. In April 2004,
Mr. Tang transferred such options to Purple Mountain Holding,
Ltd., a corporation over which Mr. Tang holds ultimate investment
power. The options granted to Mr. Tang on April 18, 2001 and
September 1, 2003, expire on April 17, 2011 and August 31, 2013,
respectively. Pursuant to the termination and settlement agreement
we entered into with Mr. Tang in January 2006, the exercise period
for the options has been extended to the date 60 days after Mr.
Tang ceases to be a member of our Board of Directors.(2)
    
    The options granted to other employees expire on December 31, 2013. 2004 Plan
  Stock Options Granted under the 2004 Plan
  Option Holder
    
    Ordinary shares underlying outstanding options granted
    
    
    Exercise
Price
(US$)
    
    
    Date of grantJustin Tang
    
    
    306,250
    (1)
    
    
    5.25
    
    
    July 23, 2004Thomas Gurnee
    
    
    30,000
    (1)(2)
    
    
    6.75
    
    
    November 2, 2004James Li
    
    
    20,000
    (3)
    
    
    4.95
    
    
    April 30, 2007Guangfu Cui
    
    
    111,112
    (4)
    
    
    4.50
    
    
    September 4, 2007Kenneth Liao
    
    
    30,000
    (4)
    
    
    3.87
    
    
    December 6, 2007Michael Scown
    
    
    30,000
    (2)(5)
    
    
    3.935
    
    
    January 9, 2008Mike Doyle
    
    
    125,984
    (6)
    
    
    3.175
    
    
    May 29, 2009Wei Xue
    
    
    32,832
    (7)
    
    
    5.33
    
    
    February 25, 2010Other employees
    
    
    192,500
    
    
    From 4.95 to 6.75
    
    
    From July 23, 2004to
February 25, 2010Total
    
    
    878,678
 (1)
    
    This option is fully vested and exercisable.(2)
    
    In the event that Expedia effects a going private transaction of us
pursuant to Rule 13e-3(a)(3) under the Securities Exchange Act of 1934,
any unvested portion of the stock option shall become vested as of the
effective date of the going private transaction.(3)
    
    Vests over a five year period with 20% of the option vesting on each of
the first, second, third, fourth and fifth anniversary of the grant date.  - 56 -




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(4)
    
    Vests over a five year period with 20% of the option vesting on each of
the first, second, third, fourth and fifth anniversary of the start date
of the employees employment with us.(5)
    
    Vests over a three year period with 5,000 options vesting every six months.(6)
    
    Vests over a three year period with 30% of the option vesting on each of
the first and second anniversaries of the grant date, and 40% of the
option vesting on the third anniversary of the grant date. The option
expires on the fifth anniversary of the grant date.  The option immediately
vests upon the occurrence of a change of control as defined in the 2009 Plan.(7)
    
    Vests over a three year period with 30% of the option vesting on each of
the first and second anniversaries of January 1, 2010 and 40% of the
option vesting on the third anniversary of January 1, 2010. The option
expires on the fifth anniversary of the grant date. Performance Units Granted under the 2004 Plan
   Performance Unit Holder
    
    Ordinary Shares
underlying Outstanding Performance Units
    
    
    Date of grantThomas Gurnee
    
    
    9,222
    (1)
    
    December 1, 20088,475
    (1)
    
    December 1, 2009Michael Scown
    
    
    3,334
    (2)
    
    January 9, 20089,222
    (1)
    
    December 1, 20088,475
    (1)
    
    December 1, 2009Justin Tang
    
    
    9,222
    (1)
    
    December 1, 20088,475
    (1)
    
    December 1, 2009Guangfu Cui
    
    
    66,668
    (3)
    
    September 4, 2007Mike Doyle
    
    
    131,579
    (3)
    
    May 29, 2009Sami Farhad
    
    
    59,332
    (3)
    
    May 22, 2008James Li
    
    
    1,340
    (4)
    
    April 30, 200750,826
    (5)
    
    January 9, 2008Kenneth Liao
    
    
    33,334
    (3)
    
    December 6, 20075,084
    (5)
    
    January 9, 2008Jack Wang
    
    
    32,002
    (3)
    
    January 9, 2008Jason Xie
    
    
    43,478
    (3)
    
    January 9, 2008Yu Zheng
    
    
    44,064
    (3)
    
    January 9, 2008Other employees
    
    
    566,131
    
    
    from October 2, 2006to February 25, 2010Total
    
    
    1,090,263
 (1)
    
    The performance units vest 33% each year on the anniversary of December 1 of the grant date, and upon vesting the performance
units will be settled in cash. A recurring annual grant is made to each member of our board of directors who is not our
employee or an employee of Expedia (or an Expedia affiliate).  - 57 -




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(2)
    
    The performance units vest on December 18, 2010.(3)
    
    Twenty percent of the performance units granted to an employee vest on the first, second, third, fourth and fifth year
anniversaries of the start date of the employees employment with us.(4)
    
    Twenty percent of the performance units vest on the first, second, third, fourth and fifth year anniversaries of the grant date.(5)
    
    Forty percent, thirty percent and thirty percent, respectively, of the performance units will vest on each of the third, fourth
and fifth anniversaries of the grant date 2009 Plan
  
    
    Upon the occurrence of a change in control, the 2009 Plan provides
for immediate vesting of the then outstanding options or other equity
grants under the 2009 Plan to employees with the rank of Vice
President or above; and
    
    Within two years following the date of a change of control, if the
employment of a recipient of an award under the 2009 Plan is
terminated or resigns for good reason (as defined under the 2009
Plan), such employees options and other equity grants would vest.
  Item 16G:
Corporate Governance
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Option Holder
    
    Ordinary Shares Underlying Outstanding Options Granted
    
    

Exercise
Price(US$)
    
    
    Date of grantGuangfu Cui
    
    
    119,685
    
    
    
    3.175
    
    
    May 29 2009110,000
    
    
    
    5.695
    
    
    March 9, 2010Mike Doyle
    
    
    80,000
    
    
    
    5.695
    
    
March 9, 2010Sami Farhad
    
    
    59,843
    
    
    
    3.175
    
    
May 29 200955,000
    
    
    
    5.695
    
    
    March 9, 2010James Li
    
    
    31,496
    
    
    
    3.175
    
    
May 29 200931,000
    
    
    
    5.695
    
    
March 9, 2010Kenneth Liao
    
    
    59,843
    
    
    
    3.175
    
    
May 29 200953,000
    
    
    
    5.695
    
    
March 9, 2010Jack Wang
    
    
    31,496
    
    
    
    3.175
    
    
May 29 200931,000
    
    
    
    5.695
    
    
March 9, 2010Jason Xie
    
    
    53,543
    
    
    
    3.175
    
    
May 29 200953,000
    
    
    
    5.695
    
    
March 9, 2010Wei Xue
    
    
    31,496
    
    
    
    3.175
    
    
    May 29 2009Yu Zheng
    
    
    53,543
    
    
    
    3.175
    
    
    May 29 200953,000
    
    
    
    5.695
    
    
    March 9, 2010Other employees
    
    
    1,585,926
    
    
    3.175 and 5.695
    
    
    May 29, 2009
and March 9, 2010Total
    
    
    2,492,871
 Options Granted to Expedia Asia Pacific
   - 59 -




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Employees
  As of December 31,2007
    
    
    2008
    
    
    2009General and administrative
    
    
    203
    
    
    
    198
    
    
    
    176Cost of services
    
    
    957
    
    
    
    1,030
    
    
    
    905Sales and marketing
    
    
    365
    
    
    
    365
    
    
    
    248Service development
    
    
    252
    
    
    
    328
    
    
    
    436Total
    
    
    1,777
    
    
    
    1,921
    
    
    
    1,765
  
 Item 7: Major Shareholders and Related Party Transactions 
Major Shareholders
      - 60 -




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##### Table of Contents



High Vote Ordinary Shares Beneficially OwnedAmount
    
    
    %Principal ShareholdersExpedia Asia Pacific
    
    
    28,550,704
    
    
    
    100
    %
 Ordinary Shares Beneficially Owned(1)Amount
    
    
    %Principal ShareholdersOak Pacific Interactive(2)
    
    
    6,257,382
    
    
    
    33.25
    %Purple Mountain Holding, Ltd.(3)*
    
    
    4,033,939
    
    
    
    22.3
    %Lawrence Auriana(4)*
    
    
    3,911,111
    
    
    
    21.0
    %CRCM Institutional Master Fund (BVI), Limited(5)
    
    
    1,116,784
    
    
    
    5.9
    %Senior Executive Officers and DirectorsJustin Tang(6)*
    
    
    4,340,189
    
    
    
    23.9
    %
 (1)
    
    Beneficial ownership is determined in accordance with the
rules of the SEC and includes voting or investment power
with respect to stock as well as options, warrants or
rights.(2)
    
    Based on a Schedule 13D (Amendment No. 4) filed by Oak
Pacific Interactive with the SEC on June 24, 2009. The
address for Oak Pacific Interactive is c/o Wilson Chu,
Esq., Haynes and Boone, LLP, 2323 Victory Avenue,
Suite 700, Dallas, TX 75219.(3)
    
    Represents 1,127,670 ordinary shares, of which 1,127,688
ordinary shares are represented by 563,844 ADSs, and
2,906,250 ordinary shares issuable upon the exercise of
options held by Purple Mountain Holding, Ltd. that are
fully vested as of April 30, 2009. Justin Tang holds
investment power over the securities held by Purple
Mountain Holding, Ltd. The address for Purple Mountain
Holding, Ltd. is No. 3701, Fortune Plaza, 7 Dong Sanhuan
Middle Road, Chao Yang District, Beijing 100020, China.(4)
    
    Based on a Schedule 13G/A filed on February 12, 2010.
Represents 3,911,111 ordinary shares held for the benefit
of Mr. Auriana. Mr. Auriana has placed his shares in a
discretionary trust account with Sandgrain Securities Inc.,
with Angelo Frank Perrone being authorized to direct the
disposition of such shares. As a result, Sandgrain
Securities Inc. and Mr. Perrone may also be deemed to
beneficially own the shares. The address for Mr. Auriana is
140 E. 45th Street, 43rd Floor, New York, NY 10017.(5)
    
    Based on a Schedule 13G (Amendment No. 1) filed by CRCM
Institutional Master Fund (BVI) Limited (CRCM) with the
SEC on February 4, 2010. CRCM LP, a Delaware limited
partnership; CRCM LLC, a Delaware limited liability
company; ChinaRock Capital Management Limited, a Hong Kong
company; and Chun R. Ding, a United States citizen may also
be deemed to be beneficial owner of the ADSs owned by CRCM.
The address for CRCM is c/o Walkers (BVI) Limited, P.O. Box
92, Road Town, Tortola, British Virgin Islands VG1110.(6)
    
    Includes the ordinary shares and ordinary shares issuable
upon the exercise of options held by Purple Mountain
Holding, Ltd. listed above and described in footnote no. 3
above. In addition, this number includes 306,250 ordinary
shares issuable upon the exercise of options held by Justin
Tang that are fully vested and exercisable. The address for
Mr. Tang is No. 3701, Fortune Plaza, 7 Dong Sanhuan Middle
Road, Chaoyang District, Beijing 100020, China.  - 61 -




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*
    
    These shareholders (either directly or through entities
over which they control) and Expedia Asia Pacific are
parties to an investors agreement, dated July 23, 2004,
whereby they have agreed to vote any of our shares they
hold for the election of directors and other matters in the
manner provided in the investors agreement, including for
the election of directors designated by Expedia. By virtue
of the investors agreement, Expedia, through Expedia Asia
Pacific, may be deemed to beneficially own all of the
shares held by these shareholders. Other parties to the
investors agreement include Expedia, Billable Development,
Ltd., Lawrence Auriana, Ira S. Nordlicht and Helen S.
Scott, JTWROS, Purple Mountain Holding, Ltd., Mind Trade
Assets Limited, Gold Partner Consultants Limited, Top River
Assets Limited, Sun Li Ming and Wang Yi Jie. Related Party Transactions
 Transaction Agreement and Non-Compete Covenant.
  Other Agreements with Expedia or Affiliates of Expedia
  Hotels.com Cooperation Agreement http//www.hotels.cn
 TripAdvisor Cooperation Agreements http//www.daodao.com
  - 62 -




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##### Table of Contents



Other Related Party Transactions
 eLong-Match.com Sale.
   Agreements with Our Former Shareholders
  Arrangements with Our Affiliated Chinese Entities
 Item 4:
Information on the Company4C: Organizational Structure.
  - 63 -




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Beijing Information
 Technical services agreement.
 Equity interests pledge agreements.
 Trademark license agreement.
 Domain name license agreement. www.eLong.com www.eLong.net
 Cooperative agreement.
 
    
    develop the hotel-booking market by negotiating with hotels on behalf of Beijing Information;
 
    
    provide relevant market and hotel information to Beijing Information;
 
    
    send booking orders to hotels and accept confirmation responses from hotels for Beijing
Information; and
 
    
    accept commissions and services fees from hotels on behalf of Beijing Information.
  - 64 -




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Business operation agreement.
 Loan agreement.
 Agreement relating to exclusive purchase right of equity interest
  - 65 -




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Guarantee Agreements
 Copyright license agreement.
 Supplemental letter agreement.
 Beijing Media
 Advertising technical consulting and services agreement.
 Equity interests pledge agreements.
 Cooperative agreement.
  - 66 -




---



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Business operation agreement.
 Loan agreement.
 Agreements relating to exclusive purchase right of equity interest.
  - 67 -




---



##### Table of Contents



Trademark license agreement.
 Beijing Air
 Technical consulting and services agreement.
 Equity interest pledge agreement.
 Business operation agreement.
  - 68 -




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##### Table of Contents



Cooperative agreement.
 Trademark license agreement.
 Software Development Agreement .
 Beijing Travel
 Cooperative agreement.
 eLong Information
 Loan Agreement
 Cooperation Agreement.
  - 69 -




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##### Table of Contents



Item 8: Financial Information.
Consolidated Financial Statements
 Item 18. Financial Statements
 Legal Proceedings
  Dividend Policy
 Item 3: Key InformationRisk FactorsRisks Relating
to Ownership of Our ADSs or Ordinary Shares and Our Trading MarketYou may not receive
distributions on ordinary shares (if any) or any value for them if it is illegal or impractical to
make them available to you Item 3: Key information Risk FactorsOur subsidiaries and
affiliated Chinese entities in China are subject to restrictions on paying dividends or making
other payments to us, which may decrease our internal sources of funds and ability to pay
dividends.
 Significant Changes since December 31, 2009
 Item 7: Major Shareholders and Related Party TransactionsAgreements with our
former shareholders.
 Item 4: Information on
the Company4A: History and Development of the CompanyAcquisitions and Disposals
 
 Item 9: The Offer and Listing.   General
   - 70 -




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Trading on the Nasdaq Global Market
  High
    
    
    LowUS$
    
    
    US$January 1, 2005 through December 31, 2005
    
    
    19.15
    
    
    
    7.50January 1, 2006 through December 31, 2006
    
    
    16.39
    
    
    
    10.03January 1, 2007 through December 31, 2007
    
    
    14.10
    
    
    
    7.10January 1, 2008 through December 31, 2008
    
    
    10.25
    
    
    
    3.15January 1, 2009 through December 31, 2009
    
    
    16.97
    
    
    
    3.74
  High
    
    
    LowUS$
    
    
    US$Most Recent Fiscal QuartersJanuary 1, 2008 through March 31, 2008
    
    
    8.94
    
    
    
    7.10April 1, 2008 through June 30, 2008
    
    
    10.25
    
    
    
    6.66July 1, 2008 through September 30, 2008
    
    
    7.58
    
    
    
    3.15October 1, 2008 through December 31, 2008
    
    
    7.60
    
    
    
    6.28January 1, 2009 through March 31, 2009
    
    
    7.98
    
    
    
    3.74April 1, 2009 through June 30, 2009
    
    
    7.62
    
    
    
    5.50July 1, 2009 through September 30, 2009
    
    
    10.71
    
    
    
    6.26October 1, 2009 through December 31, 2009
    
    
    16.97
    
    
    
    9.33January 1, 2010 through March 31, 2010
    
    
    12.50
    
    
    
    9.10
 High
    
    
    LowUS$
    
    
    US$Most Recent Six MonthsOctober 2009
    
    
    12.85
    
    
    
    9.33November 2009
    
    
    16.97
    
    
    
    11.50December 2009
    
    
    12.50
    
    
    
    10.35January 2010
    
    
    12.50
    
    
    
    10.01February 2010
    
    
    11.15
    
    
    
    9.10March 2010
    
    
    11.88
    
    
    
    9.38
   - 71 -




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Item 10: Additional Information.
 Memorandum and Articles of Association
  Material Contracts
 Item 19: Exhibits
 Exchange Controls
 Item 3: Key InformationRisk FactorsRisks Related to Doing Business in the Peoples Republic of
ChinaGovernmental control of currency conversion may affect our ability to pay dividends and the
value of our ADSs Item 3: Key InformationRisk FactorsPRC regulations may limit our ability
to transfer our funds held overseas into China.
 Taxation
   - 72 -




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Cayman Islands Taxation
  United States Federal Income Taxation
   
    
    banks;
 
    
    dealers in securities or currencies;
 
    
    insurance companies;
 
    
    tax-exempt organizations;
 
    
    persons holding ADSs or ordinary shares as part of hedging, conversion,
constructive sale, straddle or other integrated transactions;
 
    
    traders in securities that have elected the mark-to-market method of accounting;
 
    
    persons who own 5% or more of our shares;
 
    
    U.S. persons whose functional currency is not the U.S. dollar; or
 
    
    Non-U.S. Holders (as defined below).
  A U.S. Holder holding or considering acquiring or disposing of our ADSs or ordinary shares is
urged to consult his or her own tax advisor concerning the U.S. federal, state, local and non-U.S.
income and other tax consequences of the holding, ownership, purchase, disposition or sale of our
ADSs or ordinary shares in light of such U.S. Holders particular circumstances.
  
    
    a citizen or resident of the United States;
 
    
    a corporation or other entity taxable as a corporation created or organized in or under the laws of
the United States, any state thereof, or the District of Columbia;
 
    
    an estate the income of which is subject to U.S. federal income taxation, regardless of its source; or
 
    
    a trust if it 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 has a valid
election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
  - 73 -




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ADSs.
  Passive foreign investment company rules.
   
    
    the gain or excess distribution will be allocated ratably over the
holding period for the ordinary shares or ADSs;
 
    
    the amount allocated to the taxable year in which the gain or excess
distribution is realized and to years before we became a PFIC will be
taxed as ordinary income;
  - 74 -




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
    
    the amount allocated to each other taxable year, with certain
exceptions, will be taxed at the highest tax rate in effect for that
year; and
 
    
    the interest charge generally applicable to underpayments of tax will
be imposed in respect of the tax attributable to each such other
taxable year.
 
    A U.S. Holder is urged to consult his or her tax advisor concerning the U.S. federal income
tax consequences of an investment in our ADSs or ordinary shares under the passive foreign
investment company rules.
 Distributions on ADSs or ordinary shares.
  Item 3: Key InformationRisk FactorsRisks Related to Doing Business in the
Peoples Republic of ChinaWe may be required to withhold PRC income tax on the dividends we pay
you (if any), and any gain you realize on the transfer of ADSs or ordinary shares may also be
subject to PRC withholding ta x
  - 75 -




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##### Table of Contents



Sale, exchange or other disposition of ADSs or ordinary shares.
 Item 3: Key InformationRisk FactorsRisks Related to Doing Business in the Peoples
Republic of ChinaWe may be required to withhold PRC income tax on the dividends we pay you (if
any), and any gain you realize on the transfer of ADSs or ordinary shares may also be subject to
PRC withholding tax
 Information Reporting and Backup Withholding
   Documents on Display
  http://www.sec.gov
 http://www.elong.net/AboutUs/sec_filings.html
  - 76 -




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Subsidiary Information
 Information on the
CompanyOrganizational Structure
 
 Item 11: Quantitative and Qualitative Disclosure About Market Risk.
 Operating and Financial Review and ProspectsQuantitative and
Qualitative Disclosures About Market Risk
 
 Item 12: Description of Securities Other Than Equity Securities.
 D: American Depositary Shares
 Fees and Charges Our ADS Holders May Have to Pay
  Fee
    
    Service$5.00 per 100 ADSs (or portion thereof)
    
     Issuance of ADSs, including issuances resulting
from a distribution of shares or rights or other
property Cancellation of ADSs for the purpose of withdrawal,
including if the Deposit Agreement terminates$0.02 per ADS (or portion thereof)
    
     Any cash distribution to registered ADS holders$1.50 per ADR (or portion thereof)
    
     Permitted transfers of ADRs pursuant to the
Deposit AgreementA fee equivalent to the fee that would
be payable if
securities distributed to the holder
had been shares and the shares had
been deposited for issuance of ADSs.
    
     Distribution of securities distributed to holders
of deposited securities which are distributed by the
depositary to registered ADS holders$0.02 per ADS (or portion thereof) per
calendar year
    
     Depositary services
  - 77 -




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Fee
    
    ServiceRegistration or transfer fees
    
     Transfer and registration of shares on our share
register to or from the name of the depositary or
its agent when the holder deposits or withdraws
sharesExpenses of the depositary
    
     Cable, telex and facsimile transmissions (when
expressly
provided in the deposit agreement) Converting foreign currency to U.S. dollarsTaxes and other governmental charges
the depositary or the custodian may
have to pay on any ADS or share
underlying an ADS, e.g., stock
transfer taxes, stamp duty or
withholding taxes
    
     As necessaryAny charges incurred by the depositary 
or its agents for servicing the 
deposited securities
    
     As necessary
 Payments Made by the Depositary to Us
  
 PART II
 
 Item 13: Defaults, Dividend Arrearages and Delinquencies.
  
 Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds.
 Use of Proceeds
    - 78 -




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Item 15: Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures.
  Managements Report on Internal Control over Financial Reporting.
   Changes in Internal Control over Financial Reporting.
  Limitations on Controls.
  Report of Independent Registered Public Accounting Firm
 
     - 79 -




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Item 16A: Audit Committee Financial Expert.
  
 Item 16B: Code of Business Conduct and Ethics.
  http://www.eLong.net/AboutUs/code_conduct.html
  - 80 -




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Item 16C: Principal Accountant Fees and Services.
  2008
    
    
    2009RMB
    
    
    RMB(in 000)
    
    
    (in 000)Audit Fees (KPMG)(1)
    
    
    1,727
    
    
    
    369Audit Fees (Ernst & Young Hua Ming)(1)
    
    
    4,989
    
    
    
    5,622Total
    
    
    6,716
    
    
    
    5,991
 (1)
    
    Audit Fees are the aggregate fees billed by KPMG or Ernst
& Young Hua Ming for the audit of our consolidated annual
financial statements and procedures related to our
quarterly financial statements. We were billed
approximately RMB6 million (US$0.9 million) for 2009 in
Audit Fees. We have not yet been fully billed by Ernst &
Young Hua Ming for audit fees in relation to the year ended
December 31, 2009.  
 Item 16D: Exemptions from the Listing Standards for Audit Committees.
  
 Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
  
 Item 16F: Changes in Registrants Certifying Accountant
     - 81 -




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Item 16G: Corporate Governance.
  
 PART III
 
 Item 17: Financial Statements.
  
 Item 18: Financial Statements.
  
 Item 19: Exhibits.
 1.1
    
    
    Second Amended and Restated Memorandum of Association of eLong, Inc.
(incorporated by reference to Exhibit 3.1 from Amendment No. 1 to
the companys Registration Statement on Form F-1 filed with the SEC
on October 12, 2004).1.2
    
    
    Second Amended and Restated Articles of Association of eLong, Inc.
(incorporated by reference to Exhibit 3.2 from Amendment No. 1 to
the companys Registration Statement on Form F-1 filed with the SEC
on October 12, 2004).2.1
    
    
    Deposit Agreement between eLong, Inc. and JPMorgan Chase Bank
(incorporated by reference to Exhibit 99(a) to the companys
Registration Statement on Form F-6 filed with the SEC on October 8,
2004).2.2
    
    
    Amendment No. 1 to Deposit Agreement (incorporated by reference to
Exhibit 99(a)(2) to the companys Post-Effective Registration
Statement on Form F-6 filed with the SEC on April 11, 2005).3.1
    
    
    Investors Agreement among eLong, Inc., IACT Asia Pacific Limited
(currently known as Expedia Asia Pacific-Alpha Limited) and other
parties thereto, dated July 23, 2004 (incorporated by reference to
Exhibit 4.6 to the companys Registration Statement on Form F-1
filed with the SEC on October 7, 2004).
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##### Table of Contents



4.1
    
    
    Stock Option Agreement between Registrant and IACT Asia Pacific
Limited (currently known as Expedia Asia Pacific-Alpha Limited),
dated July 23, 2004 (incorporated by reference to Exhibit 4.10 to
the companys Registration Statement on Form F-1 filed with the SEC
on October 7, 2004).4.2
    
    
    Amended and Restated Technical Services Agreement between eLongNet
Information Technologies (Beijing) Co., Ltd. and Beijing eLong
Information Technologies Co., Ltd., dated July 20, 2004
(incorporated by reference to Exhibit 10.6 to the companys
Registration Statement on Form F-1 filed with the SEC on October 7,
2004).4.3
    
    
    Amended and Restated Equity Interests Pledge Agreement between eLong
Net Information Technology (Beijing) Co., Ltd. and Justin Tang,
dated July 20, 2004 (incorporated by reference to Exhibit 10.8 to
the companys Registration Statement on Form F-1 filed with the SEC
on October 7, 2004).4.4
    
    
    Amended and Restated Trademark License Agreement between eLongNet
Information Technology (Beijing) Co., Ltd. and Beijing eLong
Information Technology Co., Ltd., dated July 20, 2004 (incorporated
by reference to Exhibit (incorporated by reference to Exhibit 10.10
to the companys Registration Statement on Form F-1 filed with the
SEC on October 7, 2004).4.5
    
    
    Amended and Restated Domain Name License Agreement between eLongNet
Information Technology (Beijing) Co., Ltd. and Beijing eLong
Information Technology Co., Ltd. dated July 20, 2004 (incorporated
by reference to Exhibit 10.11 to the companys Registration
Statement on Form F-1 filed with the SEC on October 7, 2004).4.6
    
    
    Amended and Restated Cooperative Agreement between eLongNet
Information Technology (Beijing) Co., Ltd. and Beijing eLong
Information Technology Co., Ltd., dated July 20, 2004 (incorporated
by reference to Exhibit 10.12 to the companys Registration
Statement on Form F-1 filed with the SEC on October 7, 2004).4.7
    
    
    Amended and Restated Exclusive Purchase Right Agreement between
eLong, Inc., Justin Tang, eLongNet Information Technology (Beijing)
Co., Ltd., and Beijing eLong Information Technology Co., Ltd., dated
July 20, 2004 (incorporated by reference to Exhibit 10.15 to the
companys Registration Statement on Form F-1 filed with the SEC on
October 7, 2004).4.8
    
    
    Cooperative Agreement between Beijing Asia Media Interactive
Advertising Co., Ltd. and Beijing eLong Information Technology Co.,
Ltd., dated July 20, 2004 (incorporated by reference to
Exhibit 10.17 to the companys Registration Statement on Form F-1
filed with the SEC on October 7, 2004).4.9
    
    
    Trademark License Agreement between eLongNet Information Technology
(Beijing) Co., Ltd. and Beijing Asia Media Interactive Advertising
Co., Ltd., dated July 20, 2004 (incorporated by reference to
Exhibit 10.18 to the companys Registration Statement on Form F-1
filed with the SEC on October 7, 2004).4.10
    
    
    Amended and Restated Advertising Technical Consulting and Services
Agreement between eLongNet Information Technology (Beijing) Co.,
Ltd. and Beijing Asia Media Interactive Advertising Co., Ltd., dated
July 20, 2004 (incorporated by reference to Exhibit 10.19 to the
companys Registration Statement on Form F-1 filed with the SEC on
October 7, 2004).4.11
    
    
    Amended and Restated Equity Interests Pledge Agreement between
eLongNet Information Technology (Beijing) Co., Ltd. and Justin Tang,
dated July 20, 2004 (incorporated by reference to Exhibit 10.20 to
the companys Registration Statement on Form F-1 filed with the SEC
on October 7, 2004).4.12
    
    
    Amended and Restated Exclusive Purchase Right Agreement among eLong,
Inc., Justin Tang, Beijing Asia Media Interactive Advertising Co.,
Ltd., and eLongNet Information Technology (Beijing) Co., Ltd., dated
July 20, 2004 (incorporated by reference to Exhibit 10.23 to the
companys Registration Statement on Form F-1 filed with the SEC on
October 7, 2004).
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##### Table of Contents



4.13
    
    
    Amended and Restated Technical Consulting Services Agreement between
eLongNet Information Technology (Beijing) Co., Ltd., Beijing Air
Services Co., Ltd., dated July 20, 2004 (incorporated by reference
to Exhibit 10.25 to the companys Registration Statement on Form F-1
filed with the SEC on October 7, 2004).4.14
    
    
    Amended and Restated Equity Interests Pledge Agreement among
eLongNet Information Technology (Beijing) Co., Ltd., Beijing
eLongNet Information Technology Co., Ltd. and Beijing Asia Media
Interactive Advertising Co., Ltd., dated July 20, 2004 (incorporated
by reference to Exhibit 10.26 to the companys Registration
Statement on Form F-1 filed with the SEC on October 7, 2004).4.15
    
    
    Amended and Restated Business Operation Agreement among eLongNet
Information Technology (Beijing) Co., Ltd., Beijing eLong Air
Services Co., Ltd., eLongNet Information Technology (Beijing) Co.,
Ltd. and Beijing Asia Media Interactive Advertising Co., Ltd., dated
July 20, 2004 (incorporated by reference to Exhibit 10.27 to the
companys Registration Statement on Form F-1 filed with the SEC on
October 7, 2004).4.16
    
    
    Amended and Restated Cooperative Agreement between Beijing Air
Services Co., Ltd. and Beijing eLong Information Co., Ltd. dated
July 20, 2004 (incorporated by reference to Exhibit 10.28 to the
companys Registration Statement on Form F-1 filed with the SEC on
October 7, 2004).4.17
    
    
    Trademark License Agreement between eLongNet Information Technology
(Beijing) Co., Ltd. and Beijing eLong Air Services Co., Ltd. dated
July 20, 2004 (incorporated by reference to Exhibit 10.29 to the
companys Registration Statement on Form F-1 filed with the SEC on
October 7, 2004).4.18
    
    
    Transaction Agreement among IACT Asia Pacific Limited (an entity
currently known as Expedia Asia Pacific-Alpha Limited),
InterActiveCorp, eLongNet Information Technology (Beijing) Co.,
Ltd., eLongNet Hi-Tech (Beijing) Co., dated July 23, 2004
(incorporated by reference to Exhibit 10.35 to the companys
Registration Statement on Form F-1 filed with the SEC on October 7,
2004).4.19
    
    
    Transfer and Escrow Contribution Agreement among IACT Asia Pacific
Limited (an entity currently known as Expedia Asia Pacific), certain
selling shareholders and Registrant, dated July 23, 2004
(incorporated by reference to Exhibit 10.36 to the companys
Registration Statement on Form F-1 filed with the SEC on October 7,
2004).4.20
    
    
    eLong, Inc. Stock Option Plan (incorporated by reference to
Exhibit 4.13 to Amendment No. 1 to the companys Registration
Statement on Form F-1filed with the SEC on October 12, 2004).4.21
    
    
    eLong, Inc. Stock and Annual Incentive Plan (incorporated by
reference to Exhibit 4.14 to Amendment No. 1 to the companys
Registration Statement on Form F-1filed with the SEC on October 12,
2004).4.22
    
    
    Termination and Settlement Agreement between eLong, Inc. and Justin
Tang, dated as of January 23, 2006 (incorporated by reference to
Exhibit 4.44 to the companys Annual Report on Form 20-F filed with
the SEC on June 29, 2006).4.23
    
    
    Employment Agreement between eLong, Inc. and Guangfu Cui, effective
as of October 8, 2007 (incorporated by reference to Exhibit 4.58 to
the companys Annual Report on Form 20-F filed with the SEC on
June 30, 2008).4.24
    
    
    Waiver Agreement among eLong, Inc., eLongNet Information Technology
(Beijing) Co., Ltd., Expedia Inc. and Expedia Asia Pacific-Alpha
Limited, effective as of November 1, 2008 (incorporated by reference
to Exhibit 4.27 to the companys Annual Report on Form 20-F filed
with the SEC on June 18, 2009).4.25
    
    
    Waiver Agreement among eLong Inc, eLongNet Information Technology
(Beijing) Co., Ltd., Expedia Inc. and Expedia Asia Pacific-Alpha
Limited, effective as of April 7, 2009 (incorporated by reference to
Exhibit 4.28 to the companys Annual Report on Form 20-F filed with
the SEC on June 18, 2009).4.26
    
    
    eLong, Inc. 2009 Share and Annual Incentive Plan (incorporated by
reference to Exhibit 4.29 to the companys Annual Report on
Form 20-F filed with the SEC on June 18, 2009).
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##### Table of Contents



4.27
    
    
    The Third Amended and Restated Loan Agreement, dated April 21, 2008,
among eLong, Inc., Justin Tang, Guangfu Cui and Jack Wang.
(incorporated by reference to Exhibit 4.30 to the companys Annual
Report on Form 20-F filed with the SEC on June 18, 2009).4.28
    
    
    The Third Amended and Restated Equity Interests Pledge Agreement,
dated April 21, 2008, between eLongNet Information Technology
(Beijing) Co., Ltd. and Guangfu Cui (incorporated by reference to
Exhibit 4.31 to the companys Annual Report on Form 20-F filed with
the SEC on June 18, 2009).4.29
    
    
    The Third Amended and Restated Equity Interests Pledge Agreement,
dated April 21, 2008, between eLongNet Information Technology
(Beijing) Co., Ltd. and Jack Wang (incorporated by reference to
Exhibit 4.32 to the companys Annual Report on Form 20-F filed with
the SEC on June 18, 2009).4.30
    
    
    The Third Amended and Restated Exclusive Purchase Right Agreement,
dated April 21, 2008, among eLong, Inc., Beijing eLong Information
Technology Co., Ltd., eLongNet Information Technology (Beijing) Co.,
Ltd., and Guangfu Cui (incorporated by reference to Exhibit 4.33 to
the companys Annual Report on Form 20-F filed with the SEC on
June 18, 2009).4.31
    
    
    The Third Amended and Restated Exclusive Purchase Right Agreement,
dated April 21, 2008, among eLong, Inc., Beijing eLong Information
Technology Co., Ltd., eLongNet Information Technology (Beijing) Co.,
Ltd., and Jack Wang (incorporated by reference to Exhibit 4.34 to
the companys Annual Report on Form 20-F filed with the SEC on
June 18, 2009).4.32
    
    
    The Third Amended and Restated Business Operation Agreement, dated
April 21, 2008, among eLong, Inc., eLongNet Information Technology
(Beijing) Co., Ltd., Guangfu Cui, Justin Tang and Jack Wang
(incorporated by reference to Exhibit 4.35 to the companys Annual
Report on Form 20-F filed with the SEC on June 18, 2009).4.33
    
    
    Letter Agreement, dated May 1, 2009, among eLong, Inc., Guangfu Cui,
Justin Tang and Jack Wang (incorporated by reference to Exhibit 4.36
to the companys Annual Report on Form 20-F filed with the SEC on
June 18, 2009).4.34
    
    
    The Fourth Amended and Restated Loan Agreement dated December 28,
2007 by and between eLong, Inc., Justin Tang and Guangfu Cui
(incorporated by reference to Exhibit 4.61 of the companys Annual
Report on Form 20-F filed with the SEC on June 30, 2008).4.35
    
    
    The Fourth Amended and Restated Equity Interests Pledge Agreement
dated December 28, 2007 between eLongNet Information Technology
(Beijing) Co., Ltd. and Guangfu Cui (incorporated by reference to
Exhibit 4.62 of the companys Annual Report on Form 20-F filed with
the SEC on June 30, 2008).4.36
    
    
    The Fourth Amended and Restated Exclusive Purchase Right Agreement
dated December 28, 2007 by and between eLong, Inc., Guangfu Cui,
Beijing Asia Media Interactive Advertising Co., Ltd., and eLongNet
Information Technology (Beijing) Co., Ltd. (incorporated by
reference to Exhibit 4.63 of the companys Annual Report on
Form 20-F filed with the SEC on June 30, 2008).4.37
    
    
    The Fourth Amended and Restated Business Operation Agreement dated
December 28, 2007 by and among the eLongNet Information Technology
(Beijing) Co., Ltd., Beijing Asia Media Interactive Advertising Co.,
Ltd., Justin Tang, and Guangfu Cui (incorporated by reference to
Exhibit 4.64 of the companys Annual Report on Form 20-F filed with
the SEC on June 30, 2008).4.38
    
    
    Business Cooperation Agreement by and among Beijing eLong
International Travel Co., Ltd. and eLongNet Information Technology
(Beijing) Co., Ltd.4.39
    
    
    Software Development Agreement dated January 1, 2009 by and among
Beijing eLong Air Services Co., Ltd. and eLongNet Information
Technologies (Beijing) Co., Ltd.8.1
    
    
    Subsidiaries of Registrant.12.1
    
    
    Certification of Chief Executive Officer Required by Rule 13a-14(a).
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##### Table of Contents



12.2
    
    
    Certification of Chief Financial Officer Required by Rule 13a-14(a).13.1
    
    
    Certification of Chief Executive Officer Required by Rule 13a-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United States
Code.13.2
    
    
    Certification of Chief Financial Officer Required by Rule 13a-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United States
Code.15.1
    
    
    Consent of Ernst & Young Hua Ming.15.2
    
    
    Consent of KPMG.15.3
    
    
    Letter from KPMG.15.4
    
    
    Consent of TransAsia Lawyers.
  - 86 -




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##### Table of Contents



SIGNATURES
   eLong, Inc./s/ Guangfu CuiGuangfu CuiChief Executive Officer/s/ Mike DoyleMike DoyleChief Financial Officer  - 87 -




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    
  F-2




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##### Table of Contents



eLong, Inc.
Consolidated Balance Sheets
 December 31,2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    US$ASSETSCurrent assets:Cash and cash equivalents
    
    
    321,541,169
    
    
    
    639,468,119
    
    
    
    93,682,609Restricted cash
    
    
    
    
    
    
    60,000,000
    
    
    
    8,790,050Short-term investments
    
    
    635,809,729
    
    
    
    313,466,666
    
    
    
    45,923,126Accounts receivable, net
    
    
    42,471,028
    
    
    
    45,353,114
    
    
    
    6,644,269Amounts due from related parties
    
    
    517,538
    
    
    
    321,247
    
    
    
    47,063Prepaid expenses
    
    
    8,840,112
    
    
    
    7,870,540
    
    
    
    1,153,040Other current assets
    
    
    14,819,774
    
    
    
    10,960,875
    
    
    
    1,605,777Total current assets
    
    
    1,023,999,350
    
    
    
    1,077,440,561
    
    
    
    157,845,934Property and equipment, net
    
    
    52,483,690
    
    
    
    44,005,090
    
    
    
    6,446,782Goodwill
    
    
    30,000,019
    
    
    
    31,950,019
    
    
    
    4,680,704Intangible assets, net
    
    
    943,359
    
    
    
    749,920
    
    
    
    109,864Other non-current assets
    
    
    30,537,915
    
    
    
    29,804,318
    
    
    
    4,366,357Total assets
    
    
    1,137,964,333
    
    
    
    1,183,949,908
    
    
    
    173,449,641LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    34,146,053
    
    
    
    41,905,401
    
    
    
    6,139,176Income taxes payable
    
    
    1,152,325
    
    
    
    2,908,320
    
    
    
    426,071Amounts due to related parties
    
    
    8,119,389
    
    
    
    1,098,586
    
    
    
    160,944Accrued expenses and other current liabilities
    
    
    81,888,166
    
    
    
    92,693,768
    
    
    
    13,579,713Total current liabilities
    
    
    125,305,933
    
    
    
    138,606,075
    
    
    
    20,305,904Other liabilities
    
    
    477,007
    
    
    
    1,843,536
    
    
    
    270,080Total liabilities
    
    
    125,782,940
    
    
    
    140,449,611
    
    
    
    20,575,984Commitments and contingencies (note 10)Shareholders equitySeries A preferred shares: US$0.01 par value;
authorized shares: 8,205,620; issued and
outstanding shares: Nil
    
    
    
    
    
    
    
    
    
    
    Series B preferred shares: US$0.01 par value
authorized shares: 50,000,000; issued and
outstanding shares: Nil
    
    
    
    
    
    
    
    
    
    
    Ordinary shares: US$0.01 par value; authorized
shares: 150,000,000; issued shares as at
December 31, 2008 and 2009: 23,073,671 and
23,085,589; outstanding shares as at December
31, 2008 and 2009: 22,513,519 and 22,817,507
    
    
    1,858,543
    
    
    
    1,879,312
    
    
    
    275,321High vote ordinary shares: US$0.01 par value;
authorized shares: 50,000,000; issued and
outstanding shares: 28,550,704
    
    
    2,362,999
    
    
    
    2,362,999
    
    
    
    346,181Treasury stock, at cost (4,000,000 shares of
common stock as at December 31, 2008 and 2009,
respectively)
    
    
    (103,392,701
    )
    
    
    (103,392,701
    )
    
    
    (15,147,116
    )Additional paid-in capital
    
    
    1,315,589,787
    
    
    
    1,326,984,833
    
    
    
    194,404,376Accumulated deficit
    
    
    (204,237,235
    )
    
    
    (184,334,146
    )
    
    
    (27,005,105
    )Total shareholders equity
    
    
    1,012,181,393
    
    
    
    1,043,500,297
    
    
    
    152,873,657Total liabilities and shareholders equity
    
    
    1,137,964,333
    
    
    
    1,183,949,908
    
    
    
    173,449,641
   F-3




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##### Table of Contents



eLong, Inc.
Consolidated Statements of Operations
 Year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues:Travel
    
    
    303,846,548
    
    
    
    331,947,035
    
    
    
    355,562,669
    
    
    
    52,090,225Non-travel
    
    
    11,550,123
    
    
    
    16,478,511
    
    
    
    23,969,363
    
    
    
    3,511,532Total revenues
    
    
    315,396,671
    
    
    
    348,425,546
    
    
    
    379,532,032
    
    
    
    55,601,757Business tax and surcharges
    
    
    17,810,292
    
    
    
    21,112,717
    
    
    
    21,638,510
    
    
    
    3,170,060Net revenues
    
    
    297,586,379
    
    
    
    327,312,829
    
    
    
    357,893,522
    
    
    
    52,431,697Cost of services
    
    
    82,497,585
    
    
    
    96,996,309
    
    
    
    106,934,784
    
    
    
    15,666,034Gross profit
    
    
    215,088,794
    
    
    
    230,316,520
    
    
    
    250,958,738
    
    
    
    36,765,663Operating expenses:Service development
    
    
    48,602,279
    
    
    
    52,584,041
    
    
    
    58,121,508
    
    
    
    8,514,849Sales and marketing
    
    
    126,971,094
    
    
    
    163,528,250
    
    
    
    133,195,446
    
    
    
    19,513,243General and administrative
    
    
    52,005,466
    
    
    
    53,652,427
    
    
    
    47,670,045
    
    
    
    6,983,701Amortization of intangible
assets
    
    
    1,060,000
    
    
    
    848,906
    
    
    
    653,439
    
    
    
    95,729Charges related to
property and equipment and
intangible assets
    
    
    1,038,896
    
    
    
    1,384,814
    
    
    
    71,635
    
    
    
    10,495(Loss)/income from
operations
    
    
    (14,588,941
    )
    
    
    (41,681,918
    )
    
    
    11,246,665
    
    
    
    1,647,646Other income (expenses):Interest income
    
    
    55,470,781
    
    
    
    29,020,353
    
    
    
    12,880,473
    
    
    
    1,887,000Foreign exchange loss
    
    
    (65,819,578
    )
    
    
    (60,937,889
    )
    
    
    (431,856
    )
    
    
    (63,267
    )Other
    
    
    131,630
    
    
    
    
    
    
    
    (11,608
    )
    
    
    (1,701
    )Total other income
(expenses), net
    
    
    (10,217,167
    )
    
    
    (31,917,536
    )
    
    
    12,437,009
    
    
    
    1,822,032(Loss)/income from
continuing operations before
income tax expense
    
    
    (24,806,108
    )
    
    
    (73,599,454
    )
    
    
    23,683,674
    
    
    
    3,469,678Income tax expense
    
    
    885,343
    
    
    
    2,993,678
    
    
    
    3,780,585
    
    
    
    553,859(Loss)/income from
continuing operations
    
    
    (25,691,451
    )
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    2,915,819Income from discontinued
operations before income tax
expense
    
    
    112,260
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense of
discontinued operations
    
    
    8,420
    
    
    
    
    
    
    
    
    
    
    
    Total income from
discontinued operations,
net of tax
    
    
    103,840
    
    
    
    
    
    
    
    
    
    
    
    Net (loss)/income
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    2,915,819Net (loss)/income per shareContinuing operations
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.06Discontinued operations
    
    
    0.00
    *
    
    
    
    
    
    
    
    
    
    
    Net (loss)/income per share
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.06Diluted net (loss)/income per shareContinuing operations
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.40
    
    
    
    0.06Discontinued operations
    
    
    0.00
    *
    
    
    
    
    
    
    
    
    
    
    Diluted net (loss)/income
per share
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.40
    
    
    
    0.06
 *
    
    Representing per share amount which is less than RMB 0.01.   F-4




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##### Table of Contents



eLong, Inc.
Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss)
 Ordinary shares
    
    
    High vote Ordinary shares
    
    
    Treasury stock
    
    
    
    
    
    
    Accumulated otherNumber of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Additional paid-in
    
    
    comprehensive
    
    
    
    
    
    
    Total shareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    income
    
    
    Accumulated deficit
    
    
    equityRMB
    
    
    
    
    
    
    RMB
    
    
    
    
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBDecember 31, 2006
    
    
    22,108,629
    
    
    
    1,828,837
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    
    
    
    
    
    
    
    
    1,297,692,517
    
    
    
    (28,566
    )
    
    
    (102,056,492
    )
    
    
    1,199,799,295Realized loss on investment securities upon disposal, net of taxes of nil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,566
    
    
    
    
    
    
    
    28,566Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,587,611
    )
    
    
    (25,587,611
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,559,045
    )Exercise of stock options and warrants
    
    
    192,718
    
    
    
    14,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,135,130
    
    
    
    
    
    
    
    
    
    
    
    3,149,851Exercise of performance units
    
    
    17,154
    
    
    
    1,291
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,291
    )
    
    
    
    
    
    
    
    
    
    
    Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,220,551
    
    
    
    
    
    
    
    
    
    
    
    7,220,551December 31, 2007
    
    
    22,318,501
    
    
    
    1,844,849
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    
    
    
    
    
    
    
    
    1,308,046,907
    
    
    
    
    
    
    
    (127,644,103
    )
    
    
    1,184,610,652Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,593,132
    )
    
    
    (76,593,132
    )Exercise of stock options and warrants
    
    
    50,732
    
    
    
    3,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    553,317
    
    
    
    
    
    
    
    
    
    
    
    556,943Exercise of performance units
    
    
    140,954
    
    
    
    9,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,832
    )
    
    
    
    
    
    
    
    
    
    
    Settlement of company share granted to independent directors
    
    
    3,332
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,557
    
    
    
    
    
    
    
    
    
    
    
    100,793Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,898,838
    
    
    
    
    
    
    
    
    
    
    
    6,898,838Repurchase of ordinary shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,000,000
    )
    
    
    (103,392,701
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,392,701
    )December 31, 2008
    
    
    22,513,519
    
    
    
    1,858,543
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    (4,000,000
    )
    
    
    (103,392,701
    )
    
    
    1,315,589,787
    
    
    
    
    
    
    
    (204,237,235
    )
    
    
    1,012,181,393Net income and comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,903,089
    
    
    
    19,903,089Exercise of stock options and warrants
    
    
    79,784
    
    
    
    5,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,201,032
    
    
    
    
    
    
    
    
    
    
    
    1,206,482Exercise of performance units
    
    
    224,204
    
    
    
    15,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,319
    )
    
    
    
    
    
    
    
    
    
    
    Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,209,333
    
    
    
    
    
    
    
    
    
    
    
    10,209,333December 31, 2009
    
    
    22,817,507
    
    
    
    1,879,312
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    (4,000,000
    )
    
    
    (103,392,701
    )
    
    
    1,326,984,833
    
    
    
    
    
    
    
    (184,334,146
    )
    
    
    1,043,500,297December 31, 2009  US$
    
    
    
    
    
    
    275,321
    
    
    
    
    
    
    
    346,181
    
    
    
    
    
    
    
    (15,147,116
    )
    
    
    194,404,376
    
    
    
    
    
    
    
    (27,005,105
    )
    
    
    152,873,657
   F-5




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##### Table of Contents



eLong, Inc.
Consolidated Statements of Cash Flows
 Year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009RMB
    
    RMB
    
    RMB
    
    US$Cash flows from operating activities:Net income/(loss)
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    2,915,819Adjustments to reconcile net income/(loss) to net
cash provided by/(used in) operating activities:Foreign exchange loss
    
    
    65,917,833
    
    
    
    61,081,290
    
    
    
    709,527
    
    
    
    103,946Charges related to property and equipment and
intangible assets
    
    
    1,038,896
    
    
    
    1,384,814
    
    
    
    71,635
    
    
    
    10,495Allowance for doubtful accounts
    
    
    2,206,673
    
    
    
    1,880,618
    
    
    
    49,556
    
    
    
    7,260Loss on disposal of property and equipment
    
    
    208,229
    
    
    
    608,337
    
    
    
    176,609
    
    
    
    25,873Depreciation of property and equipment and
amortization of intangible assets
    
    
    16,565,314
    
    
    
    20,013,087
    
    
    
    20,763,678
    
    
    
    3,041,896Share-based compensation expense
    
    
    6,002,062
    
    
    
    7,123,939
    
    
    
    11,239,905
    
    
    
    1,646,655Deferred income tax (benefit)/expense
    
    
    (1,682,525
    )
    
    
    826,679
    
    
    
    26,216
    
    
    
    3,841Gain on disposal of investment
    
    
    (134,089
    )
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities, net of
impact from acquisitions:Accounts receivable
    
    
    (14,497,502
    )
    
    
    (3,166,193
    )
    
    
    (2,884,690
    )
    
    
    (422,609
    )Prepaid expenses and other current assets
    
    
    (4,641,390
    )
    
    
    (9,440,406
    )
    
    
    5,444,664
    
    
    
    797,648Other non-current assets
    
    
    (18,257,591
    )
    
    
    (1,448,257
    )
    
    
    701,535
    
    
    
    102,775Amounts due from related parties
    
    
    (1,707,080
    )
    
    
    406,486
    
    
    
    196,291
    
    
    
    28,757Accounts payable
    
    
    23,449,811
    
    
    
    (18,633,432
    )
    
    
    7,987,137
    
    
    
    1,170,122Accrued expenses and other current liabilities
    
    
    (7,686,495
    )
    
    
    (1,800,781
    )
    
    
    11,070,143
    
    
    
    1,621,785Amounts due to related parties
    
    
    1,154,821
    
    
    
    3,203,577
    
    
    
    (6,463,600
    )
    
    
    (946,923
    )Other liabilities
    
    
    
    
    
    
    477,006
    
    
    
    22,340
    
    
    
    3,273Net cash provided by/(used in) operating activities
    
    
    42,349,356
    
    
    
    (14,076,368
    )
    
    
    69,014,035
    
    
    
    10,110,613Cash flows from investing activities:Purchase of property and equipment
    
    
    (22,190,033
    )
    
    
    (32,860,203
    )
    
    
    (11,989,450
    )
    
    
    (1,756,464
    )Acquisitions, net of cash acquired
    
    
    (250,000
    )
    
    
    
    
    
    
    (1,000,000
    )
    
    
    (146,501
    )Proceeds from disposal of property and equipment
    
    
    206,437
    
    
    
    119,213
    
    
    
    175,896
    
    
    
    25,769Proceeds from disposal of business, net direct
expense
    
    
    
    
    
    
    10,830,373
    *
    
    
    
    
    
    
    Proceeds from disposal of investment
    
    
    
    
    
    
    323,639
    
    
    
    
    
    
    
    Proceeds from short-term investment
    
    
    
    
    
    
    39,120,000
    
    
    
    635,557,578
    
    
    
    93,109,711Increase in restricted cash
    
    
    (373,326
    )
    
    
    
    
    
    
    (60,000,000
    )
    
    
    (8,790,050
    )Purchase of short-term investment
    
    
    (19,120,000
    )
    
    
    (655,016,833
    )
    
    
    (313,604,389
    )
    
    
    (45,943,302
    )Payment relating to discontinued operations
    
    
    (15,567
    )
    
    
    
    
    
    
    
    
    
    
    Payments made on behalf of related parties
    
    
    (1,895,678
    )
    
    
    (4,016,726
    )
    
    
    (834,104
    )
    
    
    (122,197
    )Net cash provided by/(used in) investing activities
    
    
    (43,638,167
    )
    
    
    (641,500,537
    )
    
    
    248,305,531
    
    
    
    36,376,966Cash flows from financing activities:Repurchase of ordinary shares
    
    
    
    
    
    
    (103,392,701
    )
    
    
    
    
    
    
    Exercise of stock options and stock warrants
    
    
    3,149,851
    
    
    
    657,736
    
    
    
    1,206,482
    
    
    
    176,751Proceeds received on behalf of related parties
    
    
    4,777,439
    
    
    
    4,403,978
    
    
    
    276,901
    
    
    
    40,566Settlement of payable to former shareholder
    
    
    
    
    
    
    
    
    
    
    (535,767
    )
    
    
    (78,490
    )Refund in relation to share option exercise
    
    
    (572,082
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by/(used in) financing activities
    
    
    7,355,208
    
    
    
    (98,330,987
    )
    
    
    947,616
    
    
    
    138,827Effect of foreign exchange rate changes on cash
    
    
    (66,942,571
    )
    
    
    (62,997,444
    )
    
    
    (340,232
    )
    
    
    (49,844
    )Net increase (decrease) in cash and cash equivalents
    
    
    (60,876,174
    )
    
    
    (816,905,336
    )
    
    
    317,926,950
    
    
    
    46,576,562Cash and cash equivalents at beginning of year
    
    
    1,199,322,679
    
    
    
    1,138,446,505
    
    
    
    321,541,169
    
    
    
    47,106,047Cash and cash equivalents at end of year
    
    
    1,138,446,505
    
    
    
    321,541,169
    
    
    
    639,468,119
    
    
    
    93,682,609Supplemental disclosures of cash flow information:Cash paid for income taxes
    
    
    14,238,145
    
    
    
    4,095,258
    
    
    
    2,067,808
    
    
    
    302,936Accrual for purchase of equipment and software
    
    
    5,521,328
    
    
    
    343,604
    
    
    
    644,263
    
    
    
    94,385Noncash contingent consideration for acquisition
    
    
    
    
    
    
    
    
    
    
    1,421,608
    
    
    
    208,267
 *
    
    The proceeds from disposal of business represents the cash received in 2008 in connection
with the disposal to Match.com of the online dating business operated under the name of eDodo
in 2006.   F-6




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Amounts in Renminbi (RMB)
 (1) ORGANIZATION AND DESCRIPTION OF BUSINESS
    (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Consolidation
  (b) Basis of presentation
  (c) Use of estimates
   F-7




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (d) Foreign currencies
   (e) Commitments and contingencies
  (f) Revenue recognition
  Hotel reservation services
  Air ticketing services
   F-8




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Other travel services
   Non-travel services
    (g) Income taxes
  Accounting for Income Taxes
 Income Taxes, Overall Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109
  F-9




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (h) Share-based compensation
      F-10




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
   Equity: Equity-based Payments to Non-Employees Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services
  (i) Loyalty points provision
  (j) Cash and cash equivalents
  (k) Restricted cash
  (l) Short-term investment
   F-11




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (m) Accounts receivable
  (n) Property and equipment
 Intangibles-Goodwill and Other:
Internal-Use Software Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use Intangibles-Goodwill and Other: Website Development Costs Accounting for Web Site Development Costs
 Capitalized software development cost
    
    3 yearsComputer equipment and purchased system software
    
    3-5 yearsFurniture, fixtures and office equipment
    
    5 years
   (o) Goodwill and other intangible assets
 Intangibles-Goodwill and Other: Goodwill Goodwill and Other Intangible Assets
   F-12




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
   (p) Impairment of long-lived assets
 Property, Plant and Equipment
Overall Accounting for Impairment or
Disposal of Long-Lived Assets
 (q) Employee benefit plans
  (r) Statutory reserves
  (s) Net income/ (loss) per share
   F-13




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (t) Advertising expense
  (u) Segment reporting
 Segment Reporting: Overall Disclosures about segments of an Enterprise and
Related Information
  (v) Operating leases
  (w) Financial instruments
  (x) Treasury stock
   F-14




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (y) Recently issued accounting pronouncements
 Business Combination
 Non-controlling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Subsequent Events Subsequent Events: Amendments to Certain Recognition and Disclosure Requirements Subsequent Events
 Generally Accepted
Accounting Principles The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles  a replacement of FASB Statement No. 162
 Consolidation Amendments to FASB Interpretation No. 46(R))
 Revenue Recognition:
Multiple-Deliverable Revenue Arrangementsa consensus of the FASB Emerging Issues Task Force
  F-15




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (3) ACQUISITION AND DISCONTINUED OPERATION
 Acquisition
  Online Dating Division
   F-16




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  Year ended December 31,2007
    
    
    2008
    
    
    2009Earnings before income tax
    
    
    112,260
    
    
    
    
    
    
    
    Income tax expense
    
    
    8,420
    
    
    
    
    
    
    
    
 (4) ACCOUNTS RECEIVABLE
  December 31,2008
    
    
    2009Accounts receivable
    
    
    45,987,075
    
    
    
    45,701,976Allowance for doubtful accounts
    
    
    (3,516,047
    )
    
    
    (348,862
    )Accounts receivable, net
    
    
    42,471,028
    
    
    
    45,353,114
  Year ended December 31,2007
    
    
    2008
    
    
    2009Balance at the beginning of year
    
    
    4,192,172
    
    
    
    1,795,120
    
    
    
    3,516,047Additions/(reversals) charged to bad debt expense
    
    
    1,596,659
    
    
    
    1,833,407
    
    
    
    (2,604
    )Write-offs charged against the allowance
    
    
    (3,993,711
    )
    
    
    (112,480
    )
    
    
    (3,164,581
    )Balance at the end of year
    
    
    1,795,120
    
    
    
    3,516,047
    
    
    
    348,862
 (5) PROPERTY AND EQUIPMENT, NET
  December 31,2008
    
    
    2009Computer equipment
    
    
    43,235,392
    
    
    
    43,010,651Furniture and office equipment
    
    
    8,091,043
    
    
    
    7,033,391Leasehold improvements
    
    
    6,584,550
    
    
    
    6,958,391Purchased software
    
    
    25,435,464
    
    
    
    25,773,632Capitalized software development costs
    
    
    16,475,292
    
    
    
    26,088,51799,821,741
    
    
    
    108,864,582Less: Accumulated depreciation and amortization
    
    
    (50,597,909
    )
    
    
    (66,605,037
    )Software development projects in progress
    
    
    3,259,858
    
    
    
    1,745,545Property and equipment, net
    
    
    52,483,690
    
    
    
    44,005,090
  F-17




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
   (6) GOODWILL AND INTANGIBLE ASSETS
   December 31,2008
    
    
    2009Goodwill at the beginning of the year
    
    
    30,000,019
    
    
    
    30,000,019Addition due to acquisition of business
    
    
    
    
    
    
    1,950,000Goodwill at the end of the year
    
    
    30,000,019
    
    
    
    31,950,019
    F-18




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  December 31,2008
    
    
    2009Customer lists
    
    
    5,051,240
    
    
    
    5,391,240Trade name
    
    
    
    
    
    
    120,000Less: accumulated amortization
    
    
    (4,107,881
    )
    
    
    (4,761,320
    )943,359
    
    
    
    749,920Useful lives of intangible assets with definite lives, in years
    
    
    5
    
    
    
    5
  Amortization2010
    
    
    406,4532011
    
    
    92,0002012
    
    
    92,0002013
    
    
    92,0002014
    
    
    67,467Total
    
    
    749,920
 (7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  December 31,2008
    
    
    2009Accrual payroll and welfare
    
    
    10,076,423
    
    
    
    15,662,838Accrued loyalty points program expenses
    
    
    13,278,634
    
    
    
    13,433,614Other accrued expenses
    
    
    24,176,330
    
    
    
    22,581,126Other payables
    
    
    4,402,010
    
    
    
    5,768,689Receipts in advance for exercise of share option
    
    
    8,898
    
    
    
    594Advances and deposits from customers
    
    
    4,054,393
    
    
    
    5,084,061Business and other taxes
    
    
    3,103,891
    
    
    
    3,150,205Payable to former shareholders
    
    
    22,787,587
    
    
    
    22,231,241Contingent purchase consideration
    
    
    
    
    
    
    734,716Deferred revenue
    
    
    
    
    
    
    4,046,684Total accrued expenses and other current liabilities
    
    
    81,888,166
    
    
    
    92,693,768
   F-19




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (8) REVENUES
  For the year ended December 31,2007
    
    
    2008
    
    
    2009Travel:Hotel reservation
    
    
    240,803,384
    
    
    
    253,457,540
    
    
    
    256,830,079Air ticketing
    
    
    57,455,084
    
    
    
    77,205,429
    
    
    
    96,035,495Other travel
    
    
    5,588,080
    
    
    
    1,284,066
    
    
    
    2,697,095Total travel revenues
    
    
    303,846,548
    
    
    
    331,947,035
    
    
    
    355,562,669Non-travel
    
    
    11,550,123
    
    
    
    16,478,511
    
    
    
    23,969,363Total revenues
    
    
    315,396,671
    
    
    
    348,425,546
    
    
    
    379,532,032
 (9) INCOME TAXES
  Cayman
  China
      F-20




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
    Income Taxes: Other Considerations or Special
Areas Accounting for Income Taxes
 Special Areas
    For the year ended December 31,2007
    
    
    2008
    
    
    2009Cayman
    
    
    (22,639,736
    )
    
    
    (47,494,616
    )
    
    
    (6,168,957
    )PRC
    
    
    (2,166,372
    )
    
    
    (26,104,838
    )
    
    
    29,852,631Total
    
    
    (24,806,108
    )
    
    
    (73,599,454
    )
    
    
    23,683,674
  F-21




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  For the year ended December 31,2007
    
    
    2008
    
    
    2009Current
    
    
    2,567,868
    
    
    
    2,166,999
    
    
    
    3,754,369Deferred
    
    
    (1,682,525
    )
    
    
    826,679
    
    
    
    26,216Total
    
    
    885,343
    
    
    
    2,993,678
    
    
    
    3,780,585
  For the year ended December 31,2007
    
    
    2008
    
    
    2009Deferred tax benefit (exclusive of the effect of the component below)
    
    
    (1,763,334
    )
    
    
    (4,322,294
    )
    
    
    1,578,116Increase/(decrease) in the valuation allowance for deferred tax assets
    
    
    80,809
    
    
    
    5,148,973
    
    
    
    (1,551,900
    )Deferred income tax expense (benefit)
    
    
    (1,682,525
    )
    
    
    826,679
    
    
    
    26,216
  For the year ended December 31,2007
    
    
    2008
    
    
    2009Computed expected tax (benefit) expense at PRC statutory rates
    
    
    (8,186,016
    )
    
    
    (18,399,863
    )
    
    
    5,920,918Increase (reduction) in income taxes resulting from:Change in the valuation allowance for deferred tax assets allocated to
income tax expense
    
    
    80,809
    
    
    
    5,148,973
    
    
    
    (1,551,900
    )Adjustment to deferred tax assets and liabilities for changes in enacted tax
rates
    
    
    (3,180
    )
    
    
    459,128
    
    
    
    Expired net operating loss carry forwards
    
    
    314,985
    
    
    
    286,655
    
    
    
    603,615Effect of differing tax rates in different jurisdictions inside PRC
    
    
    (78,000
    )
    
    
    3,009,342
    
    
    
    (2,902,609
    )Effect of differing tax rates in jurisdiction outside PRC
    
    
    7,471,113
    
    
    
    11,873,654
    
    
    
    1,542,239Prior year tax return true up
    
    
    (1,064,117
    )
    
    
    169,787
    
    
    
    83,490Non deductible entertainment expenses
    
    
    90,453
    
    
    
    115,547
    
    
    
    118,248Non deductible personnel expenses
    
    
    1,123,265
    
    
    
    
    
    
    
    Non deductible allowance for doubtful accounts
    
    
    576,746
    
    
    
    366,536
    
    
    
    38,286Nonqualified tax deductions
    
    
    187,450
    
    
    
    
    
    
    
    Others
    
    
    371,835
    
    
    
    (36,081
    )
    
    
    (71,702
    )Income tax expense
    
    
    885,343
    
    
    
    2,993,678
    
    
    
    3,780,585
  F-22




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
    For the year ended December 31,2008
    
    
    2009Deferred tax assets:Operating loss carryforwards
    
    
    3,365,883
    
    
    
    1,203,255Operating loss carryforwards, pre-acquisition
    
    
    1,136,556
    
    
    
    561,457Property and equipment
    
    
    110,030
    
    
    
    225,834Accrued expenses and deferred revenue
    
    
    2,830,607
    
    
    
    4,374,485Total gross deferred tax assets
    
    
    7,443,076
    
    
    
    6,365,031Less: valuation allowance
    
    
    (6,824,590
    )
    
    
    (5,272,690
    )Net deferred tax assets
    
    
    618,486
    
    
    
    1,092,341Deferred tax liabilities:Intangible assets with definite lives
    
    
    235,842
    
    
    
    78,615Software capitalization
    
    
    
    
    
    
    657,298Total deferred tax liabilities
    
    
    235,842
    
    
    
    735,913Total net deferred tax assets
    
    
    382,644
    
    
    
    356,428Deferred tax assets, net: Current, included in prepaid expenses and other current assets
    
    
    22,924
    
    
    
    686,069 Non-current, included in other non-current assets
    
    
    359,720
    
    
    
    327,657Deferred tax liabilities, included in other liabilities:
    
    
    
    
    
    
    657,298
      F-23




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (10) COMMITMENTS AND CONTINGENCIES
 Commitments
   Minimumleasepayments2010
    
    
    10,899,5102011
    
    
    10,169,3452012
    
    
    9,445,5182013
    
    
    2014
    
    
    Total
    
    
    30,514,373
  Guarantee
  Contingencies
  (11) SHARE-BASED COMPENSATION
 Stock options
       F-24




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  For the year ended December 31,2007
    
    
    2008
    
    
    2009Weighted average grant date fair value per share
    
    $
    2.81
    
    
    $
    2.13
    
    
    $
    1.08Weighted average assumptions usedExpected volatility
    
    
    55
    %
    
    
    55
    %
    
    
    43
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    Expected life
    
    6.5 years
    
    5.88 years
    
    3.55 yearsRisk-free interest rate (per annum)
    
    
    4.43
    %
    
    
    3.25
    %
    
    
    1.88
    %
  WeightedWeighted
    
    
    Average
    
    
    AggregatedAverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    Price
    
    
    Term
    
    
    thousands)Balance at December 31, 2007
    
    
    3,070,867
    
    
    US$
    0.61Granted
    
    
    
    
    
    
    Exercised
    
    
    (50,732
    )
    
    US$
    1.53Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    3,020,135
    
    
    US$
    0.59Granted
    
    
    
    
    
    
    Exercised
    
    
    (40,966
    )
    
    US$
    1.53Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    2,979,169
    
    
    US$
    0.58
    
    
    1.48 years
    
    
    US$
    14,734Fully vested and exercisable as of December 31, 2009
    
    
    2,979,169
    
    
    US$
    0.58
    
    
    1.48 years
    
    
    US$
    14,734
   WeightedWeighted
    
    
    Average
    
    
    AggregatedAverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    Price
    
    
    Term
    
    
    thousands)Balance at December 31, 2007
    
    
    1,563,549
    
    
    US$
    5.29Granted
    
    
    60,000
    
    
    US$
    3.94Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (149,125
    )
    
    US$
    5.04Expired
    
    
    (654,862
    )
    
    US$
    5.58Balance at December 31, 2008
    
    
    819,562
    
    
    US$
    5.01Granted
    
    
    153,864
    
    
    US$
    3.51Exercised
    
    
    (26,900
    )
    
    US$
    4.22Forfeited
    
    
    (40,000
    )
    
    US$
    4.70Expired
    
    
    (40,000
    )
    
    US$
    5.30Balance at December 31, 2009
    
    
    866,526
    
    
    US$
    4.77
    
    
    5.66 years
    
    
    US$
    718Unvested as of December 31, 2009
    
    
    332,531
    
    
    US$
    4.07
    
    
    6.15 years
    
    
    US$
    485Fully vested and exercisable as of December 31, 2009
    
    
    533,995
    
    
    US$
    5.21
    
    
    5.36 years
    
    
    US$
    233
  F-25




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  WeightedWeighted
    
    
    Average
    
    
    AggregatedAverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    Price
    
    
    Term
    
    
    thousand)Balance at December 31, 2008
    
    
    
    
    
    
    Granted
    
    
    1,259,843
    
    
    US$
    3.18Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (11,024
    )
    
    US$
    3.18Expired
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    1,248,819
    
    
    US$
    3.18
    
    
    4.41 years
    
    
    US$
    2,935Unvested as of December 31, 2009
    
    
    1,248,819
    
    
    US$
    3.18
    
    
    4.41 years
    
    
    US$
    2,935Fully vested and exercisable as of December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   Expedia Options
    Options Outstanding
    
    
    Options ExercisableWeighted AverageWeighted
    
    
    Remaining
    
    
    
    
    
    
    WeightedShares
    
    
    Average Price
    
    
    Contractual Life
    
    
    Shares
    
    
    AverageRange of Exercise Prices
    
    (In thousands)
    
    
    Per Share
    
    
    (Years)
    
    
    (In thousands)
    
    
    Exercise Price$0.10  $2.00
    
    
    2,979
    
    
    $
    0.58
    
    
    
    1.48
    
    
    
    2,979
    
    
    $
    0.58$2.01  $4.00
    
    
    1,455
    
    
    $
    3.22
    
    
    
    4.61
    
    
    
    40
    
    
    $
    3.94$4.01  $6.00
    
    
    607
    
    
    $
    5.04
    
    
    
    5.69
    
    
    
    441
    
    
    $
    5.14$6.01  $8.00
    
    
    53
    
    
    $
    6.75
    
    
    
    4.84
    
    
    
    53
    
    
    $
    6.75$0.10  $8.00
    
    
    5,094
    
    
    $
    1.93
    
    
    
    2.91
    
    
    
    3,513
    
    
    $
    1.28
  F-26




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Performance Units
     Weighted averageNumber of Shares
    
    
    grant date fair valueBalance at December 31, 2007
    
    
    524,372
    
    
    US$
    5.02Granted
    
    
    1,056,796
    
    
    US$
    4.02Settled
    
    
    (140,954
    )
    
    US$
    5.14Forfeited
    
    
    (257,258
    )
    
    US$
    4.51Cancelled
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    1,182,956
    
    
    US$
    4.22Granted
    
    
    221,550
    
    
    US$
    3.65Settled
    
    
    (224,204
    )
    
    US$
    4.38Forfeited
    
    
    (80,508
    )
    
    US$
    4.30Cancelled
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    1,099,794
    
    
    US$
    4.06
  Number of SharesBalance at December 31, 2007
    
    
    43,334Granted
    
    
    75,328Settled
    
    
    (36,664
    )Forfeited
    
    
    (3,334
    )Cancelled
    
    
    Balance at December 31, 2008
    
    
    78,664Granted
    
    
    25,425Settled
    
    
    (31,772
    )Forfeited
    
    
    (12,557
    )Cancelled
    
    
    Balance at December 31, 2009
    
    
    59,760
  For the year ended December 31,2007
    
    
    2008
    
    
    2009Cost of services
    
    
    210,764
    
    
    
    324,824
    
    
    
    837,280Service development
    
    
    2,983,797
    
    
    
    2,320,096
    
    
    
    3,130,644Sales and marketing
    
    
    680,315
    
    
    
    972,150
    
    
    
    1,974,556General and administrative
    
    
    2,127,186
    
    
    
    3,506,869
    
    
    
    5,297,425Total
    
    
    6,002,062
    
    
    
    7,123,939
    
    
    
    11,239,905
  F-27




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Warrants
   (12) ORDINARY SHARES
 Ordinary Shares
   High-Vote Ordinary Shares
   Treasury stock
   F-28




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (13) EARNINGS (LOSS) PER ORDINARY SHARE
   For the year ended December 31,2007
    
    
    2008
    
    
    2009Net income (loss) applicable to ordinary shareholders
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    19,903,089Denominator for basic income (loss) per share:Weighted average number of ordinary shares outstanding
    
    
    50,756,869
    
    
    
    49,784,263
    
    
    
    47,181,821Dilutive effect of stock options
    
    
    
    
    
    
    
    
    
    
    2,599,392Dilutive effect of performance units
    
    
    
    
    
    
    
    
    
    
    185,791Dilutive effect of warrants
    
    
    
    
    
    
    
    
    
    
    6,250Denominator for diluted income (loss) per share:
    
    
    50,756,869
    
    
    
    49,784,263
    
    
    
    49,973,254Basic income (loss) per share
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.42Diluted income (loss) per share
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.40
 (14) CONCENTRATION OF RISKS
 Credit and concentration risks
    Business and economic risks
     F-29




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Foreign exchange risk
   (15) SEGMENT INFORMATION
     Year ended December 31, 2009Hotel
    
    
    Air
    
    
    Others
    
    
    Corporate
    
    
    TotalRevenues
    
    
    256,830,079
    
    
    
    96,035,494
    
    
    
    26,666,459
    
    
    
    
    
    
    
    379,532,032Business tax and surcharges
    
    
    (12,841,504
    )
    
    
    (5,281,952
    )
    
    
    (3,515,054
    )
    
    
    
    
    
    
    (21,638,510
    )Cost of services *
    
    
    (42,813,077
    )
    
    
    (56,600,637
    )
    
    
    (6,683,790
    )
    
    
    (837,280
    )
    
    
    (106,934,784
    )Service development expenses *
    
    
    (15,175,454
    )
    
    
    (5,347,386
    )
    
    
    (8,910,568
    )
    
    
    (28,688,100
    )
    
    
    (58,121,508
    )Total Contribution
    
    
    186,000,044
    
    
    
    28,805,519
    
    
    
    7,557,047
    
    
    
    (29,525,380
    )
    
    
    192,837,230Unallocated operating expensesSales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133,195,446
    )
    
    
    (133,195,446
    )General and administrative
    
    
    (3,770,297
    )
    
    
    (3,770,297
    )
    
    
    
    
    
    
    (40,129,451
    )
    
    
    (47,670,045
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (653,439
    )
    
    
    (653,439
    )Charges related to property and
equipment and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71,635
    )
    
    
    (71,635
    )Income(loss) from operations
    
    
    182,229,747
    
    
    
    25,035,222
    
    
    
    7,557,047
    
    
    
    (203,575,351
    )
    
    
    11,246,665Total other income (expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,437,008
    
    
    
    12,437,008Income(loss) from continuing
operations before income
taxes
    
    
    182,229,747
    
    
    
    25,035,222
    
    
    
    7,557,047
    
    
    
    (191,138,343
    )
    
    
    23,683,673
 *
    
    Depreciation expense of RMB6,499,125 and RMB4,057,761 is included in Cost of services and
Service development expenses for the Hotel and Air segments. No depreciation expense is
included in the Others and Corporate segments.  F-30




---



##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Year ended December 31, 2008Hotel
    
    
    Air
    
    
    Others
    
    
    Corporate
    
    
    TotalRevenues
    
    
    253,457,540
    
    
    
    77,205,429
    
    
    
    17,762,577
    
    
    
    
    
    
    
    348,425,546Business tax and surcharges
    
    
    (12,672,877
    )
    
    
    (4,246,299
    )
    
    
    (4,193,541
    )
    
    
    
    
    
    
    (21,112,717
    )Cost of services *
    
    
    (39,093,304
    )
    
    
    (53,365,857
    )
    
    
    (4,212,324
    )
    
    
    (324,824
    )
    
    
    (96,996,309
    )Service development expenses *
    
    
    (12,914,857
    )
    
    
    (5,258,409
    )
    
    
    (6,258,828
    )
    
    
    (28,151,947
    )
    
    
    (52,584,041
    )Total Contribution
    
    
    188,776,502
    
    
    
    14,334,864
    
    
    
    3,097,884
    
    
    
    (28,476,771
    )
    
    
    177,732,479Unallocated operating expensesSales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163,528,250
    )
    
    
    (163,528,250
    )General and administrative
    
    
    (3,398,572
    )
    
    
    (3,398,572
    )
    
    
    
    
    
    
    (46,855,283
    )
    
    
    (53,652,427
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (848,906
    )
    
    
    (848,906
    )Charges related to property and
equipment and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,384,814
    )
    
    
    (1,384,814
    )Income(loss) from operations
    
    
    185,377,930
    
    
    
    10,936,292
    
    
    
    3,097,884
    
    
    
    (241,094,024
    )
    
    
    (41,681,918
    )Total other income (expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,917,536
    )
    
    
    (31,917,536
    )Income(loss) from continuing
operations before income
taxes
    
    
    185,377,930
    
    
    
    10,936,292
    
    
    
    3,097,884
    
    
    
    (273,011,560
    )
    
    
    (73,599,454
    )
 *
    
    Depreciation expense of RMB6,508,451 and RMB4,293,288 is included in Cost of services and
Service development expenses for the Hotel and Air segments. No depreciation expense is
included in the Others and Corporate segments. Year ended December 31, 2007Hotel
    
    
    Air
    
    
    Others
    
    
    Corporate
    
    
    TotalRevenues
    
    
    240,803,384
    
    
    
    57,455,084
    
    
    
    17,138,203
    
    
    
    
    
    
    
    315,396,671Business tax and surcharges
    
    
    (12,040,169
    )
    
    
    (3,160,030
    )
    
    
    (2,610,093
    )
    
    
    
    
    
    
    (17,810,292
    )Cost of services *
    
    
    (33,412,658
    )
    
    
    (40,231,011
    )
    
    
    (831,738
    )
    
    
    (8,022,178
    )
    
    
    (82,497,585
    )Service development expenses *
    
    
    (7,300,479
    )
    
    
    (3,202,201
    )
    
    
    (10,531,839
    )
    
    
    (27,567,760
    )
    
    
    (48,602,279
    )Total Contribution
    
    
    188,050,078
    
    
    
    10,861,842
    
    
    
    3,164,533
    
    
    
    (35,589,938
    )
    
    
    166,486,515Unallocated operating expensesSales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126,971,094
    )
    
    
    (126,971,094
    )General and administrative
    
    
    (3,044,231
    )
    
    
    (3,044,231
    )
    
    
    
    
    
    
    (45,917,004
    )
    
    
    (52,005,466
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,060,000
    )
    
    
    (1,060,000
    )Charges related to property and
equipment and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,038,896
    )
    
    
    (1,038,896
    )Income(loss) from operations
    
    
    185,005,847
    
    
    
    7,817,611
    
    
    
    3,164,533
    
    
    
    (210,576,932
    )
    
    
    (14,588,941
    )Total other income (expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,217,167
    )
    
    
    (10,217,167
    )Income(loss) from continuing
operations before income taxes
    
    
    185,005,847
    
    
    
    7,817,611
    
    
    
    3,164,533
    
    
    
    (220,794,099
    )
    
    
    (24,806,108
    )
 *
    
    Depreciation expense of RMB2,586,968 and RMB2,074,495 is included in Cost of services and
Service development expenses for the Hotel and Air segments. No depreciation expense is
included in the Others and Corporate segments.  F-31




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (16) RELATED PARTY TRANSACTIONS
  Commercial agreements with Expedia
   Services provided by and to Expedia
     Subleases to Expedia
  Transactions with Match.com
   F-32




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (17) SUBSEQUENT EVENTS
   F-33




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##### Table of Contents



EXHIBIT INDEX
 4.38
    
    Cooperation Agreement by and among Beijing eLong International
Travel Co., Ltd. and eLongNet Information Technology (Beijing) Co.,
Ltd.4.39
    
    Software Development Agreement dated January 1, 2009 by and among
Beijing eLong Air Services Co., Ltd. and eLongNet Information
Technologies (Beijing) Co., Ltd.8.1
    
    Subsidiaries of Registrant.12.1
    
    Certification of Chief Executive Officer Required by Rule 13a-14(a).12.2
    
    Certification of Chief Financial Officer Required by Rule 13a-14(a).13.1
    
    Certification of Chief Executive Officer Required by Rule 13a-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United States
Code.13.2
    
    Certification of Chief Financial Officer Required by Rule 13a-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United States
Code.15.1
    
    Consent of Ernst & Young Hua Ming.15.2
    
    Consent of KPMG.15.3
    
    Letter from KPMG.15.4
    
    Consent of TransAsia Lawyers.